Israeli Regulator Says Cryptocurrency is a Security Subject to the Israeli Securities Law

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The Israeli Securities Authority (ISA) has recently ruled that utility tokens issued by companies are securities and, therefore, cannot be classified as assets.

 

The ISA’s decision comes after Israeli tech startup Kirobo sought to convince the regulator that its planned token issuance did not amount to a security offering.

 

However, in response to Kirobo’s claims, the ISA published a position paper explaining why the planned token offering should “be subject to Israeli securities regulations.”

 

Disregarding Kirobo’s claim, the ISA insists that the

 

“Tokens should be regarded as securities, whether due to the risk of holding them or the expectations of the buyers to receive a short or long-term return.”

 

The regulator also highlights an important aspect of Kirobo’s proposal, which appears to undercut the utility token claims. In the position paper, the ISA reveals that

 

“Kirobo’s plans to keep hold of 0.8% of the tokens indicate that it is planning for the value of the tokens to increase.”

 

The regulator goes on to say:

 

“There is a probability that there will be investors who will purchase the token for financial purposes and out of the expectation that the value will rise, which characterizes investments in securities.”

 

To read the entire ruling in Hebrew on The ISA’s page you can click here.

 

What exactly should be designated a utility or security token? You can tell us your views in the comments section.

Written by James Finn

Written by James Finn

James is an ex-Barclays Bank analyst who now directs people to invest more safely and appropriately.

James regularly contributes to financial publications including Finance Magnates and Motley Fool.

Article Last Updated August 2021

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