Israel Missing Out In Blockchain Space Reveals Internet Association
Israel is missing out on the inherent advantages of blockchain technologies, such as managing protected databases, making smart transactions, and cryptocurrencies that can contend with the conventional financial system.
This conclusion is relinquished by a new policy document, which was issued for the first time for public comment last week by the ‘Israel Internet Association.’
This comprehensive report, comprising over 100 pages, is labeled, “Blockchain Technology in Israel: Disruptions, Uses, Challenges, and Obstacles.” It asserts, “Despite the accelerated technological development and distinct applications of blockchain technology, regulation of the cryptographic space is still in its cradle.
Like most countries, Israel has not yet formed a holistic regulatory infrastructure to promote the broad application of this decentralized technology and implement a universal solution to the hurdles that it presents.”
The report, launched by the Internet Association in association with the ‘Center for Cyber, Law, and Policy’ at the University of Haifa, was created “to assess the opportunities and challenges arising from the discernment of blockchain technology into various fields, to indicate their consequences, and to offer policy recommendations,” according to its authors.
The report suggests that the Bank of Israel “should rethink the possibility of making it easier for blockchain enterprises to open a bank account.”
The participants involved in the writing of the report were CCLP founding director ‘Niva Elkin-Koren,’ information security scholar ‘Prof. Orr Dunkelman,’ Haifa Center for Law and Technology (HCLT) director ‘Prof. Michal Gal,’ University of Haifa Professors of Law ‘Jonathan Yovel’ and ‘Orna Rabinovich-Einy,’ and ‘Gal Landau-Yaari,’ Head of research at the Hogeg Blockchain Research Institute and a CCLP research fellow.
To streamline database access
The report explains, “Blockchain technology, which is a component of the distributed ledger family of technologies, makes it attainable to build a consistent, decentralized, and time-ordered database without a pivotal player commanding the database contents.
Once the records are recorded and confirmed by the approval mechanism installed in the technology, they cannot be eliminated, similar to journal entries in BK. Blockchain technology became famous principally because of the bitcoin network, which used these records to offer the first decentralized cryptocurrency.
To a large extent, the major applications are still in monetary and financial contexts in the payment and capital market sectors.”
The report nonetheless states, “Blockchain technology offers a different path to solutions in a wide range of fields ahead of the monetary-financial context of creating cryptocurrencies and tokens.
“These applications underlie the attempts to extend the use of these technologies to other content realms like smart insurance, ensuring data reliability in medical files, managing existing state-run databases, digital identification, and management of digital identities, managing online voting, managing supply chains, etc.”
The report says that regulating the crypto space “includes stress on three main areas: tax law, preventing money laundering, and protection of the investor. The cryptographic space also emphasizes global regulatory gaps, resulting, among other things, from the rise of local cryptographic powers, such as Switzerland, Malta, Gibraltar, and Lichtenstein, and in current years, owing to Brexit, London as well.
These places are facilitating beneficial regulation aimed at luring blockchain ventures and investors in the absence of clear global guidelines and rules of operation from the ‘G7’ and ‘G20.’
“This state of affairs subjects blockchain ventures and entrepreneurs to regulatory ambiguity. In the short term, it allows them to save costs incurred in adhering to existing regulatory requirements in the market. While, in the long term, it presents them to many risks, which diverts from the urge of many of the ventures to engage in markets with no apparent regulation, including Israel,” the report says.
“Formulate a plan for giving people knowledge”
The report’s main recommendations included the following: Firstly they recommend that “the Israeli government should form an inter-ministerial team, headed by the director-general of a relevant ministry, to take accountability for devising a holistic approach that will promote normative, innovative, legal, and regulatory infrastructure for advancing blockchain-based industries in Israel.”
The report further adds, at least, the inter-ministerial team should include senior representatives from the Ministry of the Economy and Industry; Ministry of Finance; Ministry of Justice; Ministry of the Interior; Israel Tax Authority; Israel Competition Authority; Israel Innovation Authority; Capital Market, Insurance and Savings Authority; Bank of Israel, Israel Securities Authority, National Economic Council, and Digital Israel Bureau. Professional staff from industry, higher education, and a civil society dealing with these matters regularly should be involved in the team’s work.
The report conjointly recommends forming a broad blockchain training program that will be part of the processes of improving the current and future senior staff in the public and legal sector and making the ‘Digital Israel Bureau’ national venture accountable for devising a precise multi-year plan for catering private citizens with information about blockchain technology, its benefits and opportunities, and its risks.
The report claims that the Bank of Israel and its Banking Supervision Department should reconsider the possibility of making it easier for cryptocurrency and blockchain ventures in the cryptographic ecosystem to open a bank account and obtain access to banking services, without violating money laundering regulations .”
A vital vacuum exists
The report states, “The technological and financial structure of the mechanism for allotting tokens makes it probable to raise capital in comparatively short periods in a justly cheap and straightforward process, with little reliance on financial intermediaries.
It provides young ventures with access to global groups of investors that they earlier had no chance of reaching. It also makes it possible to develop shared economy ventures with tremendous potential, democratize the capital markets, with their rigid conventional financial power structures, encourage innovation and entrepreneurship.