Israel’s central bank has downplayed claims that virtual currencies such as Bitcoin are currencies, saying that it only recognizes them as assets. It proceeded to say that it was hard to come up with regulations that are aimed at monitoring the risks involved with the use of digital currencies within Israeli banks.
According to Nadine Baudot-Trajtenberg, the Deputy Governor of the Central Bank of Israel, there have been numerous complaints from the public that banks in the country were making it a nightmare to buy Bitcoin using their account balances. However, he continued to note that this is something they wouldn’t be able to address; more central banks across the globe currently face the same issue.
The Bank of Israel’s position is that they should be viewed as a financial asset,
…said Baudot-Trajtenberg in a meeting with the country’s parliamentary finance committee. He also noted that the government wouldn’t be responsible for investors purchasing Bitcoin.
Not Much Can e Done About Virtual Currencies
Although the Central Bank of Israel has been studying how virtual currencies work, Baudot-Trajtenberg has clearly stated that nothing much can be done about them. The very fact that no regulator in the world has gone ahead and issued guidelines on how the banking industry should act when it comes to increased customer activity, makes it difficult to understand the industry.
There is a real difficulty in issuing sweeping guidelines to the system regarding the proper way to estimate, manage, and monitor the risks inherent in such activity,
If you remember at the end of December 2017 we covered Israel’s potential move to issue its own cryptocurrency. In that post, Shmuel Hauser, the hairman of the Israel Securities Authority, also said something similar and stated that “the price of Bitcoin is like a bubble and we don’t want investors to be subject to that volatility and uncertainty.”.
Beyond the risks to the customer there are also compliance risks to the bank.
Bitcoin is synonymous with cryptocurrency because it’s the biggest and most popular of all the coins. Its value is also the highest, standing at more than $15,000. And since it’s based on private initiatives, Israel cannot recognize it as a currency, but as an asset. He further noted,
The anonymous nature of virtual currencies leads to the possibility that they may be used to launder money, finance crime, and so forth,
Is itcoin a currency or just a digital asset? Does it have the potential to become a currency? Do you agree with Israel’s central bank? Let’s hear your thoughts on this matter.