Tel Aviv Stock Exchange Proposes New Crypto Trading Framework: A Step Forward or a Missed Opportunity?

Overview of TASE’s Proposal

On February 27, the Tel Aviv Stock Exchange (TASE) announced its draft proposal aimed at establishing a regulation-friendly environment for cryptocurrency trading. This announcement generated buzz within the crypto industry, suggesting a hopeful shift towards broader crypto acceptance in Israel. However, some industry experts aren’t quite popping the confetti yet.

The Role of Non-Banking Members

The proposal centers around the involvement of Non-Banking Members (NBM) of the TASE, which are brokerages licensed by the Exchange. Currently, there are six firms on the official roster that include some familiar names like UBS Securities Israel and Meitav Trade. If the proposal gets the green light, these brokers will partner with authorized crypto trading providers and custodians to facilitate fiat-to-crypto transactions for their customers.

How Trading Works

Here’s the rundown on how the trading flow is expected to operate:

• The customer deposits fiat currency (Israeli shekels or otherwise) into their brokerage account.
• The broker places an equivalent amount into an omnibus account at a licensed crypto trading provider.
• When the customer orders to purchase cryptocurrency, the actual transaction occurs, and the cryptocurrencies appear in their brokerage account. Selling works similarly, with converted fiat returning to the customer’s account.

Mixed Reactions from Industry Experts

While TASE views this regulatory framework as a boon for attracting foreign investments, not everyone is ready to celebrate. Ben Samocha, co-founder of CryptoJungle, recognizes it as a step towards legitimacy post-FTX scandals but still finds room for improvement. He points out that users will only be able to withdraw fiat, meaning their crypto remains in the custody of a third party.

“It’s a step towards the right direction, but we still have a long way to go,” says Samocha.

Criticism of the Proposal

Mark Smargon, CEO of Fuse, goes a step further. He expresses disappointment at the proposal’s focus on a closed-loop system that hinders users’ ability to self-custody their assets. According to Smargon, this not only limits investors’ engagement with cryptocurrencies but also stagnates innovation:

“That misses the point of the technological advantage of blockchain and only lets users speculate on asset prices,” he argues.

Limitations on Market Impact

Smargon points out that with only a handful of licenses granted, the overall impact on the local crypto ecosystem may be limited, especially since many companies remain outside this regulatory framework. He reflects on the implications of this tight control:

“If the objective is to create clarity with listed companies by assigning rights to a few centralized entities, then that seems like one step forward and two steps back.”

A Glimpse into the Future

Beyond the trading proposal, TASE is also exploring blockchain technology within the Israeli financial ecosystem. Together with the Ministry of Finance and ready-to-go partnerships, the TASE is set to pilot a blockchain-backed platform for trading digital bonds. This initiative—the transfer of tokenized government bonds—aims to bring measurable improvements by utilizing digital currencies.

Concluding Thoughts

As TASE marches forward with its crypto ambitions, it remains to be seen whether the proposed changes herald new horizons or simply make waves in a teacup. For now, stakeholders will be keenly watching the regulatory drama unfold in the hopes that it aligns more closely with the futuristic promises of the crypto world.