Amid increasing popularity of cryptocurrency in the country, the Bank of Israel and Finance Ministry of the country are thinking seriously about the idea of coming up with a state-sponsored digital currency.
The Financial Ministry is planning to come up with state-backed cryptocurrency to be rolled out so as to bring down the cash transactions which would help in tackling tax evasion and money laundering.
Black market activity in Israel is estimated to comprise about 22 per cent of GDP.
Since the starting of 2018, a draft legal framework for a state-sponsored virtual currency has been in the forefront of Israeli legislation. Since then only, there have been news about ‘Crypto-Shekel.
On the other hand, some think the discussion about a state-backed digital currency might start heating up. This is especially so since cryptocurrency has become more and more mainstream across many facets of Israeli culture.
Due to its unconventional technological industry and high number of patents, cryptocurrency and blockchain have become popular in Israel. The nation was recently ranked as the 10th most innovative across the globe.
As a result, some think a crypto-based solution to tax evasion and money laundering might not come from a state-sponsored virtual currency, but rather from the private sector.
Notably, Bank of Hapoalim and Microsoft Azure teamed up to use blockchain for asset digitization.
Supreme Court of Israel, in February, said that only on the backdrop of crypto transactions, Bank Leumi is not allowed to close customer accounts. The cryptocurrency market opened up for other crypto enthusiast in Israel.
Russia also showed its intentions of releasing the ‘CryptoRuble’ in October 2017 so as to maintain a presence in the digital economy and start reaping financial rewards.
In order to try and ease weak Venezuelan bolivar, the leadership of Venezuela launched its own cryptocurrency Petro. The digital currency is seen as a simple tool to circumvent international sacntions by many.
Though, there are some factors which might act as hurdle to the cryptocurrency despite its popularity.
Right now, virtual currency is subject to a 46 per cent tax rate on profits for corporations, and a 25 per cent tax rate for individuals. Some believe these high rates might hinder the market going forward.
Additionally, Israeli tax authorities struck a deal with the local Bits of Gold exchange in July to hand over information about larger deposits to help fight against cases of tax evasion and money laundering.