The Deputy Governor of the Bank of Israel Nadine Baudot-Trajtenberg revealed on Monday the central bank’s official position on the recognition and regulation of cryptocurrencies. The central bank official also admitted fielding a number of public complaints about banks making it difficult to move fiat money from their accounts to purchase cryptocurrencies while adding it would be difficult to issue regulations for cryptocurrencies.
Bitcoin and similar currencies do not fit the legal definition of a currency or foreign currency. A currency fulfills the functions ascribed to it in the economic literature — a unit of account, a mean of payment, and stability that enables it serve as a store of value. None of these exist with Bitcoin or similar currencies, which are characterized by higher volatility, difficulty in making transactions, and a lack of certainty regarding the parties that stand behind it.
The Deputy Governor, the Bank of Israel
Addressing customer concerns about using their fiat money to buy cryptocurrencies, she added that banks face compliance risks, particularly when fiat funds swapped into cryptocurrencies may be used to launder money, finance crime and so forth.
Recently, we have reported that the Bank of Israel announced its plans to issue digital currency in order to create a faster payments system as well as reducing the amount of cash in the economy.