By Shelly Melancon (Switzerland)
Israel seems to be toeing the path of the US with a recent bill that proposes the reporting of the digital asset, Bitcoin. According to reports, as per the proposed regulation, investors will be compelled to declare their Bitcoin holdings to Isreali regulators. However, only investors holding Bitcoin assets above $61,000 will be obliged to do so.
The proposal was introduced on Tuesday by the Israeli Ministry of Finance. Details of the proposal revealed that it is aimed at optimizing tax collection. As such, investors in the country who hold above $61k worth of Bitcoin would be required to report their crypto assets to tax regulators.
Bitcoin Association in Israel Opposes Bill
Garnering mixed reactions, the proposed law has met a brick wall from an association in Israel known as Israel Bitcoin Association (ISA). According to the association’s head of regulation, Nir Hirshman, the group immediately forwarded a letter to the chairman of the Isreali Tax Authority (ISA) outlining reasons why the proposed law was dead on arrival.
The ISA further argued that there was no other asset that carried such regulatory requirements in the country. As such, the proposal will considered as discriminating Isreali Bitcoin holders and crypto investors. The association added in its letter that the bill touched upon the core feature of Bitcoin, which is decentralization or non-interference by third parties. Moreover, the bill infringes on the privacy rights and data of these investors.
Israeli Government to Curb Cash Circulation with CBDC
Meanwhile, the Isreal government is still carrying out research on a central bank digital currency (CBDC) like the national banks in the other countries. According to reports, the Israeli government plans to reduce the amount of cash in circulation within the country. With the new bill, Isreali authorities want to limit the volume of ‘black capital’ and shed light on undeclared assets and income.
However, Nir Hirshman argued that the law bill will cause harm to investors and holders of the top crypto asset and the tax collection aim will not be achieved. He added that imposing that obligation on Israeli investors would automatically turn them to tax defaulters on account of failing to accurately declare their Bitcoin assets.
Tax regulators in the country may be unable to enforce the proposed bill if passed into a law, it has been argued. Usually, Bitcoin transactions are only traceable to the public keys from where such transactions are made. Tracking the transactions to the identities of parties involved will be a huge barrier to cross.
Israel’s latest bill is similar to another proposed by the European Commission, a regulatory arm of the EU to monitor crypto transactions. According to the commission, this was necessary, especially at a time where cryptocurrencies could be used to facilitate money laundering and other illegal activities. To achieve this, the commission proposed scrapping anonymous crypto wallets. With the law, the commission will be able to gain access to users’ real names, addresses, phone numbers and other details.
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