Business 6 July 2018

Dan Taylor

Israeli exchange Bits of Gold agrees to snitch on big crypto traders

An Israeli cryptocurrency exchange has agreed to join forces with the country’s tax authorities in referring on the details of large traders, according to local reports.

Bits of Gold, the Tel Aviv exchange with over 50,000 different customers, has said it will comply with the demands of the Israel Tax Authority by referring information on any traders clearing over $50,000 in any 12-month period, in the latest example of tax authorities closing in on larger cryptocurrency traders.

The announcement follows an on-site inspection from the tax authority at Bits of Gold’s head office, in search of information about their biggest trading clients.

Exchanges in Israel are already burdened by a number of compliance requirements, including under anti-money laundering provisions and terrorism finance laws. However, this information is generally protected from tax authorities under separate privacy law requirements, and the major difference in the present agreement is that Bits of Gold will begin giving access to this data to the tax authorities directly.

Without agreements of this kind, the tax authority has no power to compel exchanges to share information about their clients, a state of affairs backed up by court rulings on the issue. As a result, the agreement method is seen as a way of voluntarily bringing crypto exchanges on board.

The Israel Tax Authority has engaged a number of different methods to reach cryptocurrency traders and investors, with agreements of this type now thought to be at the forefront of their approach. Plans are already underway for reaching similar agreements with other exchanges in the country, as the authorities look to establish a firmer grip on cryptocurrency trading.

Earlier this year, regional branches of the authority sent out letters to those they suspected of being involved in cryptocurrency trading, demanding an account of all of their holdings, alongside a full statement of their transaction histories.

The data requested covered all accounts at exchanges, details of all cryptocurrency wallets, and a report of any money made from crypto transactions. This was coupled with a demand on parties to disclose whether or not they were engaged in mining cryptocurrency.

The heavy-handed approach from the Israeli authorities is indicative of the kind of measures governments can use to apply pressure to the cryptocurrency space. While it may be too late for some larger investors in Israel, there’s no doubt regulators elsewhere will be considering similar tactics.

Note: Tokens on the Bitcoin Core (SegWit) chain are referenced as BTC coins; tokens on the Bitcoin Cash ABC chain are referenced as BCH, BCH-ABC or BAB coins.

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