Today, the Tel Aviv Stock Exchange (TASE) announced a consultation on new rules to allow non-bank members such as brokers to provide cryptocurrency services to clients. The move responds to a request from the Tel Aviv Stock Brokers Association (TBA).

One of the goals is to encourage the Israeli public to use this regulated route instead of unregulated foreign exchanges that expose them to additional risks. He also wants to attract foreign investment and investors to Israel.

Brokers would not provide cryptocurrency services directly, but would work only with authorized cryptocurrency dealers and custodians to buy, sell, and custodian cryptocurrency. Initially only Bitcoin and Ether would be supported and crypto activities will be separated from others in a walled garden approach. Clients will need to sign a separate letter for crypto with brokers that acknowledges the significant risks in the sector.

Customers cannot be given credit for cryptographic services. According to the walled garden, cryptocurrencies cannot be used as collateral against conventional securities trading.

Israel believes that the New York Bitlicense currently represents best licensing practice and is taking a similar approach for its own regime. TASE non-bank members will only be able to deal with crypto exchanges that are licensed in Israel or by the New York State Department of Financial Services (NYDFS). For custody, the restrictions are similar, but approved custodians include those with a stock exchange or clearing license.

TASE first revealed plans for digital assets last October, including working with the government for tokenized bonds. In November, the Ministry of Finance published proposals to regulate digital assets. And the Israel Securities Authority (ISA) published a query meaning that many cryptocurrencies will be considered securities because they are financial investments.