Israeli banks, engaged in some Bitcoin transactions, are waiting for a clear guidance from regulators on whether to accept Bitcoins or not. But sources close to the issue say discussions among representatives from the Bank of Israel, the Israel Securities Authority and relevant units in the justice and finance ministries ended with a decision not to draw up Bitcoin-specific regulations, because they did not find it “appropriate to prohibit or set bank action toward virtual currency”, the Haaretz .com reports, citing a Bank of Israel official who asked not to be identified.
Governments are worried about Bitcoin’s potential to be used for money laundering, as the currency is transferred between users without the mediation of banks, or the government supervision. Although it was launched in 2009, regulators around the world have yet to decide how to treat the currency and its market.
Banks are cautious about Bitcoin, as they are required by law to report suspected money-laundering transactions. That is why banks don’t know who they should treat clients who trade the virtual coin. That is the reason why Israeli banks have decided to wait before allowing Bitcoin transactions.
According to Shaham’s colleague at Yigal Arnon, Guy Lachmann, the laws of most Western countries, including Israel, define currency as the country’s legal tender, backing it as a valid means of payment within and outside its borders. “At this time, I don’t know a single country around the globe that recognizes Bitcoin as a legal tender, and therefore it should not be seen as a currency,” Lachmann says.
However, he admits that Bitcoins should be treated like a currency, and warns that the government will not be able to prevent the use of it.
“Bitcoin has become accepted as a form of payment among a large group of people in many countries,” he says. “Therefore, if we focus on the economic definition of money and not its political one, it should be seen as a currency.”
According to financial experts Israel is too small for a country to defy the global trend of Bitcoin use, but the country could regulate it and use technologies to minimize the dangers it entails.