The finance committee of the Knesset, the legislative branch of Israel’s government, convened a special meeting on Wednesday to postpone the law regulating cryptocurrency exchanges. The original plan was for the law to take effect on June 1, but its introduction has now been delayed by four months, Jacob Enoch, co-chair of the Israel Bar Association (IBA), told Cryptovest in an e-mail.
The surprising postponement leaves financial services providers and Israeli companies without any regulation for cryptocurrency exchanges.
Enoch, who also co-chair’s IBA’s committee on blockchain and cryptocurrency, said:
"The reason for the delay is the lack of a prohibition on money laundering, which implies that these companies have not been mindful of, and have not acted to prevent, money laundering to this day. This is something that is not acceptable to say about an entire market.”
He noted further:
“There is no doubt that the beneficiaries of the postponement of the law are the institutional bodies, which fear the competition that will be created with the entry of fintech companies licensed for services in financial assets. I am concerned that instability in such important decisions could lead to stagnation in existing fintech companies and delay the start of new companies with innovative financial solutions. Even worse, this creates antagonism among fintech investors in Israel, which could snowball into a loss of trust."
Enoch said that last-minute decision to delay the enactment of the new legislation is nothing short of dramatic. There is no doubt the move will benefit the large financial institutions, which understandably fear the competition certain to emerge with the entry of regulated fintech companies in the sector.
“One can only hope, that such inevitable antagonism among fintech investors will not snowball into a potential loss of trust,” he added.
Only last week, the Israeli finance ministry published the draft Money Laundering Prohibition Order relating to financial services in digital currencies in a move to finalize the legal framework in the cryptocurrency space. It was supposed to be the dawn of regulation for vehicles such as Bitcoin and Ethereum and to pave the way for institutional banks to enter the field.