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A coin representing the bitcoin cryptocurrency is seen on circuit boards in this framework illustrative.
(photo credit: REUTERS)
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At the end of 2017, Bitcoin peaked at almost $ 20,000 (73,000 ILS) per currency and pushed cryptocurrency into the center of global attention. Bitcoin, the major cryptocurrency, has since collapsed again up to a third of its peak, but many are still optimistic about the potential of cryptocurrency to shake the world economy.
Several governments have begun to explore the potential of supporting a cryptocurrency as a national currency. Venezuela founded the Petro currency, the first cryptocurrency supported by the state, under the leadership of Nicholas Maduro. However, the currency has been subjected to heavy controls because it is completely controlled by Venezuela and is in violation of the main decentralization of cryptocurrency.
The Israeli Ministry of Finance and the Bank of Israel also played with the idea of developing a cryptocurrency-backed state. According to an anonymous finance official, the digital shekel would be of equal value to the physical shekel and would help the Israeli state to fight tax evasion. The digital currency would also record every transaction by mobile phone and will allow faster transactions.
While a state-supported cryptocurrency offers potentially greater stability to a currently unstable market, a cryptocurrency solution is more likely to come from the private sector. Israel has a budding cryptocurrency industry and is hosting its own blockchain association. Bloomberg has ranked Israel as the 10th most innovative country in the world, largely due to the high-tech density and the activity of patents, two fundamental factors for the development of cryptocurrencies.
The largest Israeli banks are also involved in cryptocurrency by becoming more mainstream in Israel culture in very different ways The Bank of Hapoalim has worked with Microsoft Azure to digitize financial assets using blockchain technology. Microsoft Azure is at the forefront of blockchain development and the bank hopes the partnership can lead to safer and faster financial transactions.
On the other hand, in February 2018 the Israeli Supreme Court annulled previous decisions and Bank Leumi could not cease accounts based solely on cryptocurrency transactions. The bank had previously blocked customers' cryptocurrency transactions under the pretext of not complying with Israeli anti-money laundering regulations.
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One aspect of Israeli law that perhaps retains Israel from widespread adoption is heavy taxation of the product. Governments around the world are working to find ways to tax decentralized currency since it became a global multimillion-dollar industry.
In Israel, cryptocurrency is classified as a taxable property and is subject to capital gains tax. The companies would be taxed at a rate of 46% on profits and individuals at 25%.
In America, the IRS's decision to tax cryptocurrency has undermined the cryptocurrency community. Many investors fear they are in violation of tax laws, but government intervention has not slowed cryptocurrency as an industry.
A quick search on Google reveals a huge industry with its arms spread across the financial world with exchanges, websites, magazines and forums entirely dedicated to the future of digital money.
While private industry drives much of the cryptocurrency innovation, some of the major adoptions could come in the form of government intervention. Cryptocurrency purists would say that the incursion of governments into the cryptocurrency space runs counter to the basic principles of currency. But the entry of governments around the world has caused a massive increase in the notoriety of cryptocurrency and, because of its enormous potential, it was only a matter of time before states like Israel entered the cryptocurrency ring.
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