Cryptocurrency token offerings, sometimes dubiously labeled “ICOs,” have raised hundreds of millions of dollars in startup capital. The government of Israel is considering regulating this digital wild west.
The chairman of the Israel Securities Authority (ISA), Shmuel Hauser, has announced the formation of a national committee to study the regulation of digital currency issuances via token offerings.
The committee will be headed by Moty Yamin, director of the corporate finance department, and Gitit Gur-Gershgoren, chief economist. Per the ISA release, the committee will: “study and characterize these projects, .. prepare a comparative review of the law in developed countries, and .. recommend a regulatory policy in relation to them, especially in areas related to the Securities Authority.” The committee is directed to submit a report to the ISA chairman no later than December 31, 2017.
According to the ISA:
“Transactions based on decentralized registration are gaining momentum in recent times and are becoming a common and widespread means of financing in the world. According to estimates, in the first half of 2017, more than $1 billion was raised in this way, and the volume of capital raising is expected to increase in the coming years. Israel is considered a global leader in block business, and a large number of companies operate there, some of which have carried out currency issues in recent months and have received investor demand.”
The committee will focus on several issues:
- Examine the economic nature of [token offering] transactions and the overlap between them and other activities subject to the application of securities laws in Israel.
- Conduct a comparative review of the securities laws and regulation in various countries in connection with digital currencies .
- Examine the applicability and enforceability of securities laws to the offering.
- Make recommendations for regulation, striving to balance between encouraging alternative means of financing and developing technological innovation, protecting investors, and warning the public against unregulated investments.
- Examine potential collaboration with other regulators and the blockchain industry in Israel.
The ISA notes that token offerings are not currently regulated in Israel in any way:
“the investors participating in them are exposed to various risks resulting from the lack of sufficient disclosure, similar to any investment in unregulated ventures, and possibly beyond. In addition, and from the point of view of companies conducting currency issues, questions arise regarding the application of securities laws. Therefore, investors and companies must be very careful and consider their steps well before they participate or initiate such an offering.”
With this announcement, the ISA joins a growing movement by securities regulators to enter the token offering phenomena.