In Israel, banks will no longer be able to refuse to host profits from cryptocurrency activities as long as the money does not come from criminal cases. The decision has just been announced by the country’s Central Bank to the delight of cryptosphere players. This new measure aims to complement the Ordinance on the Prohibition of Money Laundering, which applies to entities related to cryptocurrencies and their operations.
Banks will have to carry out a risk assessment before any refusal
In a circular addressed to local banks, the Bank of Israel (BoI) to update the rules imposed on cryptocurrency entities. These aim in particular to protect banks from the risks incurred when receiving and transferring cryptocurrencies. From now on, all local financial institutions are required to accept profits generated during activities related to cryptocurrencies. Nevertheless, the circular establishes a list of details that a bank must examine when it processes such transactions. These include the nature of the initial funds, the size of the settlement and the risk classification.
Local players in the cryptosphere are delighted that the Bank of Israel is finally recognizing the obligation of banks to conduct a risk assessment before crypto funds are refused. Vice-president of finance and regulation of the Bit2C exchange, Ron Tzafrati, however, expressed some reservations on the merits of the new measure. He affirms that this leaves a wide discretion to the banks to continue to refuse in many cases funds that do not really present a real risk of money laundering. As exchanges must already obey laws guaranteeing the fight against this crime, he considers the additional assessment of banks superfluous.
The Freeman case
In 2013, Esther Freeman, a retired Israeli citizen, invested $ 3,240 in bitcoin. Eight years later, she has managed to multiply her investment by 100 thanks to the crazy growth of cryptocurrency. Bank Hapoalim, one of the country’s main banks, refused to cash the deposit of the profits it had transferred from its crypto wallet. The reason for the refusal was linked to the source of the funds, the bank believing that they could be linked to illicit activity.
Ms. Freeman ultimately had to sue the bank to win her case and cash in her profits. The court ruled in particular that the Hapoalim bank should not restrict account activity to its clients only because they are related to cryptocurrencies. In response, the financial institution had promised to better study the details of the transaction as now suggested by the Bank of Israel.
Despite the new measure by the country’s central bank, Israel remains very attentive to cases of cryptocurrency being used for criminal purposes. Local authorities have just seized $ 800,000 in cryptocurrency that would be used to finance Hamas activities.
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Luc Jose Adjinacou
Far from having dampened my enthusiasm, an unsuccessful investment in 2017 in some crypto only increased my enthusiasm. I therefore resolved to study and understand blockchain and its many uses and to relay information relating to this ecosystem with my pen.