Israel Securities Authority: Coins Are Not Securities, but Tokens Are

The Israel Securities Authority today released a report detailing the conclusions of a committee convened to discuss the applicability of Israeli securities laws to Cryptocurrencies Cryptocurrencies By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw Read this Term.

According to the report, the study was ordered because the agency understands that regulatory certainty is essential to both encourage the development of the industry in Israel and to maintain investor confidence in the capital market.

The conclusions reached by the ISA regarding the legal definition of cryptocurrency are significant because these definitions are what decide whether tax will be paid on profit made, and how much.

The ISA report lists several conclusions:

1. Cryptocurrencies which are to be used as currencies only (i.e. that do not confer additional rights/are not controlled by a central entity) shall not be considered securities. This includes those that are used for future investment.

This means that cryptocurrencies such as Bitcoin Bitcoin While some may still be wondering what is Bitcoin, who created Bitcoin, or how does Bitcoin work, one thing is certain: Bitcoin has changed the world.No one can remain indifferent to this revolutionary, decentralized, digital asset nor to its blockchain technology.In fact, we’ve gone a long way ever since a Florida resident Laszlo Hanyecz made BTC’s first official commercial transaction with a real company by trading 10,000 Bitcoins for 2 pizzas at his local Papa John’s.One could now argue that While some may still be wondering what is Bitcoin, who created Bitcoin, or how does Bitcoin work, one thing is certain: Bitcoin has changed the world.No one can remain indifferent to this revolutionary, decentralized, digital asset nor to its blockchain technology.In fact, we’ve gone a long way ever since a Florida resident Laszlo Hanyecz made BTC’s first official commercial transaction with a real company by trading 10,000 Bitcoins for 2 pizzas at his local Papa John’s.One could now argue that Read this Term will not be considered securities under Israeli law.

2. A cryptocurrency which grants rights similar to those of traditional securities such as shares and bonds shall be considered a security.

Here, the agency is distinguishing between coin and token. A token that imparts ownership is called an 'equity token' - DAO tokens are one example.

3. Each cryptocurrency will be characterised individually.

4. The status of initial coin offerings will be analysed according to the product offered.

Now, the Israeli Tax Authority recently published guidelines for the taxation of cryptocurrency, basing its conclusions on the interpretation that cryptocurrencies are not currencies, but assets. Thus, tax will be paid on profit from cryptocurrency as it would be for any transacted commodity.

This means that, as far as the ITA is concerned, the fact that Bitcoin is not a security is of no importance - it is still an asset, not a currency. The agency is still working on its definition of ICOs.

The ISA has published its report on its website and invites comment until the 20th of April.