Potential changes could take effect within half a year.

The Israel Securities Authority (ISA) could amend its three existing currency laws to squeeze cryptocurrencies.

The regulator’s proposals aim to provide investors with maximum security when dealing with digital assets, drawing attention to the recent collapse of FTX and the severe losses it caused to consumers.

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Israel’s financial regulator has proposed incorporating cryptocurrencies into the country’s existing securities legislation. Therefore, regulators will directly oversee the operations of Bitcoin and altcoins. It also groups asset classes into the "financial instruments" category, which also includes securities, marketing and co-investments.

The potential amendments aim to provide additional protection to Israeli cryptocurrency players and highlight the industry’s technological advancements.

“Cryptocurrencies are digital representations of value used for financial investment purposes that can be transmitted and stored electronically through the use of distributed ledger technology or other technologies,” the ISA said.

The regulator believes that embracing the cryptocurrency industry could have a positive impact on Israel’s economy as it could trigger diversified capital flows.

“Advanced technologies in these assets can improve economic efficiency in many areas, reduce costs, reduce the need for intermediaries, and optimize how information is transferred between entities,” the proposal reads.

The ISA added that cryptocurrencies have become a common niche market in the Mediterranean country, with more than 200,000 Israelis exposed to the market and about 150 companies operating in the field.

The proposal is open for public comment until February 12 and could come into effect six months later.

A reminder about FTX and Celsius

The ISA believes that global regulators failed to enforce relevant rules on the crypto industry last year, leading to the collapse of many companies, such as FTX and Celsius Network. It also notes that the latter’s founder is Alex Mashinsky, who is of Israeli descent.

Last June, Celsius suspended withdrawals, swaps and transfers between accounts, citing "extreme market conditions" in a move the company hoped would stabilize its liquidity.

Instead, the former cryptocurrency giant’s problems continued and it had to lay off 150 employees in July. A week later, it filed for Chapter 11 bankruptcy protection, and CEO Mashinsky resigned from his post in September. The company was close to an acquisition deal with FTX, but the latter's collapse killed those plans.

Celsius recently extended the deadline for customers to submit claims to January 10 (at least). One of the leading companies in crypto lending, it had 1.7 million customers at the beginning of last summer. Some of its creditors include bankrupt Alameda Research and Pharos USD Fund SP.