For Israel and the chief securities regulators who attended the Jan 20 conference, DLT offers more than just an evolution in their capital markets – it’s now a market imperative. Multiple officials spoke of how new, lower-cost DLT platforms could open financing opportunities to new market players, meeting notes show.
The Israel Securities Authority (ISA) intends to draft a regulation for distributed ledger technology-backed (DLT) digital asset exchange platforms, according to ISA Chair Anat Guetta.
ISA unveiled the plan at a Jan 20. conference near Tel Aviv, announcing it seeks to offer a “a complete digital value chain for investors” including digital assets registered, traded and settled using DLT. It is now calling on the private sector to pitch the regulator with proof-of-concept DLT trading systems.
“After this stage is concluded, we will create relevant regulation that will make it possible to introduce digital platforms in Israel’s capital market”, Guetta said at the conference.
It could also set a precedent for other securities regulators, Guetta said.
ISA’s endorsement of DLT comes after a special committee studied the technology for six months, considering everything from smart contracts to token issuance.
“The committee concluded that DLT technology has transformative potential for Israel’s capital market, and the ability to place it at the forefront of global technology”, Guetta said at the conference.
In a 54-page study of DLT’s history, use cases in other countries, potential benefits and legal implications in the Israeli context, the committee found DLT could offer faster settlement times and streamline clearance. It highlighted the advantages for initial public offerings (IPO).
“The greatest promise of using DLT in capital markets is in the field of IPOs, trading and clearance”, the committee’s final report read. “It includes reducing associated costs, reducing systemic economic risks, developing an innovative financial environment and even opening up the capital market to companies that were previously uninvolved.”
The ISA is no stranger to employing DLT. Its secure “Yael” messaging platform is based on a blockchain, as is a shareholder voting platform and a regulatory document archive.
Japan’s Financial Regulator Issues Draft Guidelines for Funds Investing in Crypto
Japan’s Financial Services Agency (FSA) has issued draft guidelines for funds investing in crypto.
The Sept. 30 announcement, which mentions crypto assets in the introduction but only alludes to them in the text of the proposed amendment itself, is the latest move by the authorities in the country to prudently manage the development of the market without shutting it down.
“It is anticipated that financial products that invest in crypto assets (virtual currency) will be formed in the future”, the agency notes in the introduction to the proposed revisions to Supervision Guidelines. “But there are also indications that investment in crypto assets is encouraging speculation. The agency believes that it should carefully handle the formation and sale of investment trusts that invest in such assets.”
The actual revisions are a bit more vague. They advise funds to exercise caution when investing in assets outside the original objective of the trust and to evaluate potential risks, such as those relating to volatility and liquidity. It refers to the worrying investments as “non-specific assets.”
“Special attention should be paid to the composition of such products”, the amendment cautions.
“In the revised bill, virtual currency is not mentioned”, notes the Zaikei newspaper, though it reported on the revisions as dealing with crypto assets by referencing the introduction.
Public comments are being taken by the FSA on the revisions through the end of October.
The issuing of the draft comes in the context of movement on the regulatory front in Japan. The country was rocked by the collapse of Mt Gox in 2014 and the 2018 hack of the Coincheck exchange and has been working to reestablish the crypto market on a better footing. Since early 2018, the FSA has been fine-tuning the regulatory framework for exchanges and establishing a framework for crypto offerings, and in early 2019 amendments were proposed to Payment Services Act and the Financial Instruments and Exchange Act.
Progress is already evident. In the first half of 2019, the FSA approved three new exchanges after approving none in 2018. Last week, a self-regulatory organization (SRO) formed that will help guide the development of the market for security token offerings (STO), suggesting that the private sector is preparing for the new regulatory environment.
