Cryptocurrency exchange Bits of Gold and the Israeli Tax Authority have joined hands to fight against money laundering via digital assets in the country. Local news outlet Calcalist reported on July 5, 2018, the agreement between the two entities as Israel seeks to curb any illicit money laundering via cryptocurrencies while maintaining a decisive stand for the volatile asset class.
Israel Looks to Curb Money Laundering
As stated under the terms of the agreement, the Tel Aviv-based Bits of Gold will provide transactional data of customers, making more than ILS 1,81,902 ($50,000) in a 12-month period, to Israel’s Money Laundering and Terror Financing Prohibition Authority (IMPA).
The report added local tax authorities might not be given access to customer data as strict privacy laws are in place for Israeli citizens. While Bits of Gold may not be popular in foreign markets, it has over 50,000 users in Israel and offers same-day bank wire, low-fee trading, and a self-branded Bitcoin ATM for customers.
Tomer Niv, Chief Growth Officer of Bits of Gold, stated:
“Since we established the company in 2013 and as the largest cryptocurrency broker in Israel, we are working together with the various regulators to help formulate the rules for the cryptocurrency industry and to comply with them.”
Meanwhile, the exchange was quick to dispel any unwanted rumors after the announcement, implying that the agreement exists to operate under the jurisdiction of Israeli law and while protecting the privacy of customers at all times.
Israel’s Cryptocurrency Stance
Despite its economic concerns, Israel has embraced cryptocurrencies with an optimistic view, presumably for building industry and generating revenue. In February 2018, the Israeli Tax Authority (ITA) released guidelines concerning “distributed means of payment,” which classified cryptocurrency as lawful property subject to tax like any other commodity.
Cryptocurrency mining businesses are taxed at the same rate as a traditional business, and all capital gains are charged only on encashed profits. As the asset class is intangible, private investors are exempt from paying Value Added Tax (VAT). However, in line with global views on the matter, Israel treats ICOs and token issuers with suspicion.
While the ITA cannot force companies to reveal customer information due to relevant laws, cryptocurrency businesses have it in their best interests to do so for establishing themselves as a legitimate entity.
Bits of Gold Fights off Banks
The exchange gained fame in 2017 after lodging a court complaint against Bank Leumi, Israel’s largest bank, for withdrawing banking services. Unfortunately, Bits of Gold lost its case as the court ruled in favor of the bank’s allegations of the exchange not following Know-Your-Customer (KYC) rules, despite the latter claiming the contrary.
However, in February 2018, the court discovered Bits of Gold was diligent in following requisite legislation, and the bank had classified the exchange under a gambling business. Thus, the decision was rendered invalid, and Bits of Gold won a temporary court order prohibiting any bank to withdraw their services to the exchange.