Today, the Bank of Israel published guidelines for policing stablecoin activities in the nation on Wednesday, outlining the central bank’s suggestions for managing digital currency correlated to the value of other assets like the US dollar. The report comes after the country’s Ministry of Finance published rules for the regulation of digital assets in November. According to the document, the central bank’s proposed regulations are intended to permit stablecoin use in the nation “while managing the risk inherent in using them, and adjusting the consumer protections and prudential requirements.”
According to the central bank, stablecoin issuers should be required to keep reserves equal to the total quantity of cryptocurrency in circulation, covering “100 percent of its liabilities to the coin holders.” The advice is in line with that of other countries, like as Hong Kong, which intends to regulate asset-backed stablecoins by June of this year.
To increase efficiency, it is suggested that supervisory responsibilities be divided among several regulators. The central bank suggests requiring stablecoin issuers to obtain operating licenses. It further states that some stablecoin issuers should be under the Capital Market Authority’s supervision, while others should be regulated by the Banking Supervision Department for larger stablecoins that may have “systemic importance.”
The Bank of Israel’s payment systems oversight division will be in charge of regulating payments-focused stablecoins, according to the document. Before the bank makes any necessary adjustments and suggests legislation to the government, the proposed rules are available for public discussion until March 15.
According to rumors that surfaced in January, the Israel Securities Authority (ISA) is trying to develop a new legal framework for digital assets that primarily fall under its control, which might bring greater clarity to the market.
The proposed proposal would alter the country’s legal framework to include “digital assets” into the current securities legislation, potentially labeling the majority of cryptocurrencies as financial investments under ISA oversight. The changes would define digital assets as digital representations of value that are used for financial investment and that can be traded using a distributed ledger. They would also add them to the existing category of “financial instruments” in Israeli securities law.