Israeli crypto exchange Bits of Gold has become the country’s first crypto firm to receive a license from the Capital Markets Authority according to to the company’s social media posts on September 18.
As a result of obtaining the license, Bits of Gold will be able to store digital currencies via secure escrow in the “bits of gold wallet”, which they have been working on for some time. It will also begin providing a service that will allow banks and other financial institutions to connect to its digital asset services.
In a public statement, Bits of Gold said the license is the next step in their mission to make the world of digital currencies more accessible to the Israeli public “in a simple and secure way.”
Authorities in Israel were cited limitation of cash payments in the country as it seeks to combat illegal activity and drive the transition to digital payments in the country.
Despite this, institutional adoption in the country has been slow, with Israeli banks being very hostile to crypto and blockchain services until recently, citing anti-money laundering (AML) issues.
In 2017, the Israeli Supreme Court ruled that the local bank Leumi was permitted by law to refuse service on Bits of Gold, with the bank claiming that the nature of Bitcoin made it impossible for them to comply with ALM requirements.
The The position of the Supreme Court has changed until 2019, when it ruled that Leumi could not block the Bits of Gold account based on regulatory concerns, setting a precedent for other cryptocurrency firms.
The enforcement of new anti-money laundering regulations by the government in Israel further opened the way for cooperation between banks and the crypto industry. The development also established a requirement that crypto companies must have a license, although companies that applied for one were granted permission to continue operating temporarily.
Another barrier to institutional adoption in Israel is its tax laws. The country was recently rated as the third worst country for cryptocurrency taxation according to a report released by crypto analytics firm Coincub on September 8.
According to Coincub, the sale of cryptocurrencies in Israel is generally subject to a capital gains tax of up to 33%, and if the investment activity is considered business-related, it is subject to an income tax of up to 50%.
While the Capital Market, Insurance and Savings Authority already granted Israel’s first crypto license to infrastructure firm Hybrid Bridge Holdings earlier this month, the license Bits of Gold received represents the first license granted to an active broker.