Israel financial regulator grants first ‘crypto’ license to local firm

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Israel’s Capital Markets, Insurance, and Savings Authority (CMISA) has granted the first permanent license to Hybrid Bridge Holdings Ltd to carry out digital asset activities in the country. According to financial news outlet Globes, the approval shows the regulator’s resolve to stimulate the country’s virtual assets industry.

While it is unclear what type of digital asset business Hybrid Bridge will be engaged in, insiders said that the company is building infrastructure to connect fiat currencies in bank accounts that have undergone Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations with virtual currencies. The ambitious undertaking is expected to simplify the trading process for new investors in the space.

Globes noted that in the coming days, several firms would also be given a permanent license by the Moshe Barkat-led institution. The companies are being subjected to stringent checks to prevent unqualified service providers from operating in the ecosystem.

“As part of the licensing procedure, the Capital Markets Authority examines the full range of consumer risks, with an emphasis on four main risks: money laundering and terrorist financing risks, technological risks, operational risk and safeguarding of customers assets,” Globes reported.

Hybrid Bridge Holdings was incorporated in 2021 and has previously obtained an active license as a financial operator in the country. Mohik Teumim, Har-Tov Ido, and Gitam B.D.O hold a large chunk of the company’s shares.

Rough patch for operators in Israel

Digital asset service providers have endured a tumultuous period with the country’s regulators. In February, the Capital Markets Authority charged with issuing licenses for operators in Israel opened an investigation into the operations of Binance exchange.

The review of facts led to the suspension of all Binance’s activities in the country, with the exchange going as far as removing support in Hebrew and the local currency.

“Following the intervention of the capital market, Binance has at this stage stopped marketing to Israelis until and all activities focussed on Israel until we examine the issue of licensing,” said the Capital Markets Authority.

As it tries to solve the issue of virtual currency providers, Israeli regulators are also exploring the possibilities of a Central Bank Digital Currency (CBDC). Creating a digital shekel is inching forward with results from a Bank of Israel survey noting significant interest amongst respondents.

The Bank of Israel plans to adopt a two-tier approach in developing a CBDC with private sector players acting as intermediaries with the public while the banking regulator interfaces with the commercial banks. The proposed digital shekel will be issued on a distributed ledger to promote financial inclusion and transparency and prevent the “cryptoization” of the economy.

To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.

Watch: The BSV Global Blockchain Convention presentation, CBDCs and BSV