Israeli Court Rules Banks Can Deny Service to Bitcoin Firms

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 related ventures in Israel that are still dependent on traditional banking services for their operations just received a major blow. The Tel Aviv district court ruled on Tuesday against Israeli Bitcoin exchange Bits of Gold, who sought its intervention after the firm's bank service was denied.

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According to court documents, Bank Leumi - the second largest bank in Israel - has decided to stop servicing the Tel Aviv based company for its Bitcoin-related activity. The main argument the bank presented the court with is that it can't follow its AML (anti-money laundering) requirements due to the very nature of 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.

The bank said that despite the fact that Bits of Gold followed KYC (know your customer) procedures and even reported to the authorities all transactions over a certain amount as required by Israeli law, the bank cannot really know who the end receiver of the cryptocurrency is. Specifically, it fears that criminal organizations can send their 'monkeys' (meaning low level people under their control who will never testify against the masterminds) to buy bitcoins and send them to wallets under their control.

The bank said that as cryptocurrency wallets are not issued by any authority, and are only identified by 'a bunch of numbers', it cannot make sure that it is following its own AML requirements as the bitcoins can be exchanged back into fiat currency at some unregulated venue outside of Israel.

Strangely, the bank even thought that its own cyber-security issues warranted cause to stop working with the exchange. It told the court that hackers broke into its accounts in order to send funds from the bank to buy bitcoins. Bits of Gold assisted the bank with the investigations into the matter and there was no indication that it was involved in any way.

The bottom line is, that despite praising Bits of Gold for its transparency and compliance operations, the court ruled that the bank can decide to deny service to it. This is because of the lack of clear guidance by the national financial supervision authorities regarding the legality of Bitcoin leave room for the bank to reasonably claim that it does not have the technological tools to verify its own obligations before the law.