Bitcoin has not recognized as a currency by Isreal’s Central bank. The bank says it will not recognize digital currencies such as bitcoin as a currency or a foreign currency since it does not fit with the legal definition or fill the main function of the currency.
In a speech on Monday, Bank of Israel deputy governor Nadine Baudot-Trajtenberg announced the central bank’s real position on the recognition and regulation of cryptocurrencies like bitcoin. The central bank governor also told fielding a number of public complaints regarding banks making it difficult to move fiat money from their accounts to purchase cryptocurrencies while adding it would be “difficult” to issue regulations for cryptocurrencies.
The governor announced:
“Bitcoin and similar virtual currencies are not a currency, and are not considered foreign currency. The Bank of Israel’s position is that they should be viewed as a financial asset, with all that entails.”
The official was talking at a finance committee meeting specially assembled to address the growing adoption and use of cryptocurrencies.
She said Bitcoin doesn’t suit the Legal Definition
The strength of confidence from its users is a critical element of a currency, the central bank said, emphasizing that this confidence only comes from a currency which is considered as a legal tender with legal backing.
“[A currency] fulfills the functions ascribed to it in the economic literature—a unit of account, an mean of payment, and stability that enables it serve as a store of value. None of these exist with Bitcoin or similar currencies, which are characterized by higher volatility, difficulty in making transactions, and a lack of certainty regarding the parties that stand behind it.”
A citizen who transfers his fiat money to an exchange where virtual currencies are sold may later transfer the money anonymously to any unreliable party in Israel or abroad. So, in this case, the bank will have to bear responsibility. This is why banks must define their own parameters in providing services to customers interested in adopting cryptocurrencies.
“[A]s far as we know, no banking regulator anywhere in the world has issued guidelines to the banking system on how to act in relation to customers’ activity in virtual currencies.”
The chairman called on the central bank and other regulators to create a report on how to develop a regulatory framework for bitcoin and other cryptocurrencies within a month. regarding the details of an upcoming pivot to regulating, in essence, recognizing bitcoin and cryptocurrencies are currently unknown.