Bits of Gold Wins Court Battle Over Israel’s Second Largest Bank

Source: Blockonomi

Israeli based cryptocurrency exchange Bits of Gold has won a ruling in its fight to use banking services in Israel. According to a report from Finance Magnates, the highest Court in the country, the Israeli Supreme Court, has ruled that it could operate its corporate account with Bank Leumi.

Bits of Gold CEO Yuval Roash was quoted in the report saying the news was a historic moment not just for the company but for cryptocurrency businesses in Israel.

He said:

This is an exciting moment for us as a company and for the [cryptocurrency] community in general. We worked hard to set up a company which met regulatory requirements, in a new industry, and those efforts paid off. I am proud to be a part of this flourishing industry and push it towards the right regulation.

Bits of Gold’s Bank Accounts Closed

The scuffle between Bits of Gold and Bank Leumi, the second largest bank in Israel, started in 2017 when a court ruled that Leumi could deny the exchange its services based on its concerns on Bitcoin transactions. This decision was made amid surging crypto prices. The bank had argued that the very nature of the company’s business made it difficult for them to adhere to the country’s anti-money laundering (AML) laws, put in place by the Bank of Israel.  The bank noted that Bitcoin transactions are recorded on a ledger online, and the recipients of each transaction cannot be identified easily, making it impossible for the bank to follow the law.

According to the bank, the exchange was following Know-Your-Customer (KYC) procedures, but this was not enough. It feared that criminal organizations could send their cohorts to the exchange to buy crypto and send to their bitcoin wallets. The bank also took a stab at crypto wallets, saying they are not issued by a central authority or easy to identify, making it difficult for the bank to follow its AML requirements.

Temporary Injunction against Leumi

A year after the ruling, the Court issued a temporary court order prohibiting Leumi Bank from limiting Bits of Gold’s access to its bank account. Per the report at the time, Leumi had taken the decision to mete out the same treatment the Central Bank had prescribed on the gambling industries—shut them down. By classifying Bitcoin exchanges as gambling sites, Bank Leumi had the justification it needed to close the exchange’s accounts.

Judge Anat Baron was quoted by the report saying: “This court order is not intended to harm the bank’s rights to analyze with specificity every transaction that takes place with the bank account or to take any actions that are related to minimizing risks, which become transparent through the activities of the company.”

The high court ruling sets a precedent for crypto exchanges in Israel to engage local banks for banking services. The Israeli government has been doing its fair part in regulating the sector. In March, the Israel Securities Authority (ISA) published its final report on crypto regulations. The report includes ways to develop the local crypto sector and protect investors funds and rights. To do these, the ISA wants disclosure requirements to be mandatory for ICO promoters and that token sales should be treated as crowdfunding.

“The committee recommends considering adjustment of the existing regulation to create more suitable regulatory infrastructure for this trading activity in order to better cope with the risks incurred in this activity,” the agency notes.

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