Bitcoin Traders & Holders Request Rejected by Israel’s Central Bank

Crypto enthusiasts and investors in Israel have been facing several ambiguities related to crypto polices. Up till now, the stance of banks on cryptocurrencies hasn’t been clarified fully. Bringing things into the light, Bitcoin Association based in Israel, asked banks to provide a copy of policy documents. In response, the Bank of Israel, straightforwardly denied the request of Bitcoin Association with a reason that the document possessed ‘commercial secrets.’

The Israel Bitcoin Association, filed a petition in Jerusalem district court, in order to obtain policies related to cryptocurrencies, of all banks in the country. As several local bitcoin owners and investors were not entertained by various banks, a number of freedom of information petitions were filed as Israeli banks didn’t open accounts to people holding even small amount of cryptocurrencies.

People holding even small fraction of cryptocurrencies were not allowed to open accounts, the Bitcoin Association, led the petitions on behalf of bitcoin holders. In simple terms, Bitcoin Association lessened the burden of investors who usually aren’t capable of coping with high court fees.

Bitcoin Association is a non-profit community that aims to promote and support the use of bitcoin and other cryptos. While the freedom of information petitions simply demanded the unveiling of crypto policies, legal proceedings against the Union Bank of Israel, aimed to compel bank to entertain a bitcoin trader or holder. Therefore, by filing a petition against Union Bank who wasn’t allowing a user to deposit sales of his bitcoin in his bank account, the Bitcoin Association supported the cause. The petition filed read:

The bank did not conduct an examination of the petitioner’s specific circumstances. As far as the bank is concerned, the fact that the money came from the sale of bitcoin is enough to rule out in advance the option of depositing it in the petitioner’s account.

Apart from refusing to share the official document regarding cryptocurrency policies, banks are not allowing the Bitcoin Association to open an account. Despite the fact that association does not indulge in selling or buying of cryptocurrencies, Mizrahi Tefahot Bank hasn’t allotted any account to the association.

It was suggested that due to the inclusion of the word ‘Bitcoin’ in the official name of the association, the request for opening a bank account was turned down.

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After being denied of a basic right, Bitcoin Association turned to Dr. Hedva Ber, Bank of Israel Supervisor of Banks, for help. While agreeing to help the association, she imposed some conditions for the Bitcoin Association. She comforted that the account would be opened in the future but donations in the form of digital assets to the account are strictly forbidden.

The reason for the harsh behavior of banks against crypto traders and users remains to be a mystery but the consequences of these acts are conspicuous. It was estimated that at least $85 million worth taxes couldn’t be collected by the government because crypto holders’ link to the banking sector have been completely cut-off. And that’s just a rough guess whereas the accumulated amount of unpaid tax due on the earnings from cryptocurrencies is said to be much higher.

The struggle of bitcoin and other cryptocurrency holders continues as petition rulings will take some time. Meanwhile, banks have been quite reluctant in sharing their take on the matter. Neither has any bank explained the reason for strict steps, nor any update on legal proceedings on their part has been revealed.

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While conversing with BlockPublisher, Jimmy Nguyen, the President of the Bitcoin Association, emphasized on several aspects regarding governments take on bitcoin. He said:

“It’s time for the Bitcoin and cryptocurrency world to grow up, and that includes being more regulation friendly. For consumers and big businesses to get more comfortable using cryptocurrency, they need to feel it is safer. This does not always require new regulation but for governments to clarify how existing laws – such as money transmitter, KYC/AML, and securities laws – apply to cryptocurrency. I expect more jurisdictions to enact laws governing digital asset businesses and also tokenized assets, in order to make things clearer.”

The events taking place nowadays and the problematic zero tolerance for cryptocurrencies could have been avoided by implementing on Nguyen’s advise. Lack of clarity and regulations are resulting in several conflicts and damaging the crypto ecosystem. In the future, it would be of interest to see if Israeli banks could make the policies transparent or introduce regulations for bitcoin and altcoins.

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Fatir Malik

Electrical engineer by profession, turned into blockchain developer. Fatir contributes regularly with his insights about latest developments in fintech sector. Contact the editor at editor.opinions@blockpublisher.com

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