Israel-based crypto exchange Bits of Gold became the first crypto firm in the country to receive a license from the Capital Markets Authority, according to social media posts from the company on Sunday.
As a result of obtaining the license, Bits of Gold will be able to store digital currencies through secure custody in a “Bits of Gold Wallet” they have been working on for some time. It will also begin offering a service that enables 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 its mission to make the world of digital currencies more accessible to the Israeli public “in a simple and secure way.”
Authorities in Israel have placed restrictions on cash payments in the country as they try to combat illegal activity and drive a transition to digital payments in the country.
Despite that, institutional adoption in the country has been slow with Israeli banks being very unfriendly to crypto and blockchain services until recently, citing anti-money laundering (AML) concerns.
In 2017, the Israeli Supreme Court ruled that local bank Leumi was legally allowed to refuse service to Bits of Gold, the bank claiming that the nature of Bitcoin (BTC) made it impossible for them to comply with AML requirements.
However, the Supreme Court’s position had changed by 2019, when it ruled that Leumi could not block Bits of Gold’s account based on regulatory concerns, thus setting a precedent for other cryptocurrency firms.
The enforcement of new AML regulations by the government of Israel further opened the way for cooperation between banks and the crypto industry. The development also imposed a requirement for crypto companies to have a license, although companies that applied for it were granted permission to temporarily continue their operations.
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Another barrier to institutional adoption in Israel is the tax laws. The country was recently ranked as the third worst country for crypto taxation, according to a report released by crypto analytics firm Coincub on September 8.
According to Coincub, the sale of crypto is generally subject to a capital gains tax of up to 33% in Israel, and if the investment activity is considered business-related, it is subject to income tax of up to 50%.
While the Capital Market, Insurance and Savings Authority had already granted the first Israeli crypto license to infrastructure firm Hybrid Bridge Holdings earlier this month, the license that Bits of Gold received represents the first to be granted to an active broker.