Bank of Israel proposes framework to regulate stablecoins

Rick Steves

The goal of the regulation is to allow activity in stablecoins while managing the risk inherent in using them, and adjusting the consumer protections and prudential requirements to this unique activity.

The Bank of Israel has announced it is examining the issue of activity in digital assets, and their impact on the areas under the Bank’s purview as part of its mission to maintain financial stability, manage the monetary policy, and regulate the payment systems in Israel.

To that effect, the central bank established a committee headed by Deputy Governor Andrew Abir to examine the matter from several perspectives: prudential, regulatory, technological, monetary, and legal.

Regulation to allow stablecoins while managing its inherent risk inherent

The decision comes in light of the increased interest in digital assets and the risks derived from them. Stablecoins are getting most of the attention from Israel’s central bank, which is formulating a document of principles for regulating stablecoin activity in Israel.

“A stablecoin is a digital asset that operates on a technological infrastructure, and aims to stabilize its value by pegging it to another asset’s value, and the coin’s issuer operates a mechanism that maintains the stability of the coin’s value. In contrast to other digital assets, stablecoins have the potential to serve not only as an investment asset but also as a means of payment”, Bank of Israel stated.

“The Bank of Israel’s function, as defined in law, requires the Bank of Israel’s regulation and supervision of means of payment. The principles document refers to regulating the activity of stablecoins in Israel. The goal of the regulation is to allow activity in stablecoins while managing the risk inherent in using them, and adjusting the consumer protections and prudential requirements to this unique activity.”

The document proposes rules for stablecoin activity that the Bank of Israel recommends promoting through legislation or establishing as part of the regulator’s directives, including:

  • To establish a requirement according to which the reserve assets that will be held by a stablecoin issuer will cover 100 percent of its liabilities to the coin holders. This requirement will greatly reduce the prudential risk deriving from the activity in stablecoins.
  • In terms of the identity of the regulators, it is proposed that stablecoin issuers will require licensing: for a coin that does not have systemic importance, the licensing shall be by the Capital Market Authority; otherwise the licensing shall be by the Banking Supervision Department. In the document, criteria are proposed for defining a stablecoin as having systemic importance.
  • A stablecoin that is declared to be a controlled payment system shall be overseen by the payment systems oversight function at the Bank of Israel.
  • In order to enhance the supervisory efficiency, it is proposed to establish coordination mechanisms among the various relevant regulators.

Read this next

Retail FX

Axi extends partnership deal with Manchester City

FX broker Axi, previously known as AxiTrader, has renewed its flagship sponsorship deal with soccer giant Manchester City.

Digital Assets

Russia delays digital ruble pilot to May

Russia has postponed its central bank digital currency (CBDC) pilot indefinitely, which was originally scheduled for April 1, as it awaits specific legislation to be voted before the “crypto ruble” trial.

Executive Moves

Scope Markets promotes James Hughes to head of marketing

Belize-based FX and CFDs brokerage Scope Markets has promoted James Hughes, who until recently was its head of brand, to take on an expanded role as the company’s global head of marketing.

Retail FX

Fraudsters clone Financial Commission’s website, two ex-members under suspicion

The Financial Commission, an industry-specific dispute resolution service that caters to the financial services industry, today announced that it believes a clone website has been impersonating its membership roster.

Retail FX

CMC Markets warns of operational challenges in Q1

CMC Markets PLC (LSE:CMCX) said in a trading update for the fiscal year 2023 that February and March posed a more challenging environment with lower equity volumes and a higher proportion of lower margin institutional trading activity.


Why Is Digital PR So Important for Financial Service Providers? Buzz Dealer’s CEO Uri Samet with the Answers

Digital PR is all about spreading your message faster, wider, and stronger in the online world, through proper SEO, link-building, and organic and paid social media work.

Inside View

Why And How Are Virtual Cards Disrupting The Finance Industry

Virtual cards have the potential to revolutionize the finance industry by providing faster and more secure payments, wider acceptance, and eco-friendliness.


Sweat Economy’s Oleg Fomenko on upcoming launch of Move-to-Earn app in the US

With the crypto winter’s biggest hurdles seemingly behind us as the prices of Bitcoin et al. climb the charts again, the Web3 economy is preparing for the next phase.

Industry News

OptionMetrics acquires Woodseer to add dividend forecast data for equities

“The addition of Woodseer’s product suite will enhance our ability to serve financial market stakeholders and academic institutions in their analysis of equity market performance and risk.”