Bitcoin is a Financial Asset, Not a Currency: Bank of Israel

The Bank of Israel has confirmed its stance on Bitcoin and other cryptocurrencies, claiming it will not recognize them as actual currencies. The central bank also commented on how drawing up regulations to monitor the risks associated with digital currencies was a complicated process.

As per a report by Reuters, Deputy Governor Nadine Baudot-Trajtenberg, while speaking at a meeting of Israel’s parliamentary finance committee, clarified that the government was not responsible for Bitcoin investors.

“The Bank of Israel’s position is that they [cryptocurrencies] should be viewed as a financial asset,” Baudot-Trajtenberg said.

Baudot-Trajtenberg pointed out that while the central bank was studying cryptocurrencies, there were few global precedents for how to regulate and monitor them, since regulators worldwide had yet to draft rules for how central banks should tackle investors’ activity in the cryptocurrency space.

“There is a real difficulty in issuing sweeping guidelines to the system regarding the proper way to estimate, manage, and monitor the risks inherent in such activity,” she stated. “Beyond the risks to the customer there are also compliance risks to the bank.”

Bitcoin’s wildly fluctuating price, its decentralized nature, and the anonymity it offers have all been key points of concern for regulators worldwide. However, the warnings issued by regulatory bodies have done little to quell investor enthusiasm, and the crypto market is growing bigger than ever, with a market cap of well over $700 billion.

In light of its growing popularity, committee members attending the parliamentary finance committee meeting urged Israeli regulators to speed up the process of drafting regulations for keeping a check on Bitcoin and its peers.

“There seems to be a greater possibility that they [cryptocurrencies] will become central to our financial lives,” said panel chairman Moshe Gafni.

The need to issue regulations was deemed particularly urgent, seeing as anonymous, privately-held cryptocurrencies like Bitcoin might be used for illegal activities such as money laundering, fraud, and even terrorism financing.

In addition to tackling the issue of regulating cryptocurrencies, Israel is also currently looking into the prospect of launching its own central bank-issued digital currency based on the shekel.