Israel, however, appears to be taking a different approach.
Israeli regulators are not ignoring digital currencies, they are simply waiting to see what the rest of the world does about them.
Lack of applicable legislation
According to Haaretz, regulators do not feel the need to prohibit transactions related to digital currencies at this time. Attorney Shiri Shaham, who specializes in banking law, told reporters that there is no legislation in Israel today that could address bitcoin and similar digital currencies.
Therefore, the use of digital currencies remains legal, or 'unregulated' to be more precise. Shaham said:
Lawyer Guy Lachmann points out that currency is defined as the country’s legal tender and since bitcoin is not recognized as legal tender anywhere in the world, it should not be seen as a currency.
Although Israel can apply existing money laundering legislation to questionable bitcoin transactions, there are still a number of issues that need to be addressed.
Taxation is perhaps the biggest problem. Traders must report their trading income to tax authorities, but there are some exceptions that might attract tax dodgers. In addition, value-added tax does not apply to the purchase of bitcoin.
Shaham believes the Bank of Israel should not ignore digital currencies, but she cautions that it should not adopt a conservative position either. She argues that there is nothing lawmakers can do to prevent trading in bitcoins, even if such trades are outlawed. She said:
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