A Tel Aviv district court ruled last week that Israeli banks can deny services to bitcoin firms after it ruled in favor of the country’s second largest bank.
According to court documents, Bank Leumi had stopped servicing Israeli bitcoin exchange Bits of Gold claiming that the exchange couldn’t follow its anti-money laundering (AML) regulations.
While Bits of Gold followed the bank’s know-your-customer (KYC) procedures, reporting transactions to authorities over a certain amount, the bank said it couldn’t be sure as to who the end receiver of the digital currency was.
The bank added that hackers had also managed to break into its accounts to send funds from the bank to purchase bitcoins. Yet, while the digital currency exchange assisted with the bank and its investigations there was no indication that Bits of Gold was involved.
In an attempt to resume their services Bits of Gold sought the court to intervene; however, the court ruled in favor of Bank Leumi stating that it can deny service to it. The court stated that this was due to a lack of clear guidance from national financial supervision authorities, reports Finance Magnates.
Given the fact that bitcoin has been growing in Israel it will be interesting to see how this decision will impact other financial establishments in the country.
The main use behind the account was for Bits of Gold to deposit U.S. dollars and Israeli Shekels from those who wanted to buy the digital currency and for the exchange to the transfer the respective national currencies to the accounts of sellers selling bitcoin.
In January, the Israeli Tax Authority issued a circular draft stating that bitcoin was a taxable asset. Citing the Bank of Israel, the country’s central bank, which doesn’t see digital currencies as foreign currencies, digital currencies will be taxed according to existing fixed tax rates.
It remains to be seen how things will now progress in Israel, but it seems that it will be harder for digital currency exchanges to take off if banks now have the power to deny services to them in order for them to provide a service to their customers.
Featured image from Shutterstock.
Last modified: May 21, 2020 9:45 AM UTC