Israeli Regulator Proposes to Ban Crypto-focused Companies from Stock Exchange

Israel's securities authority announced on Thursday a proposed rule that would bar companies that trade or mine cryptocurrencies from being listed on the Tel Aviv Stock Exchange.

For daily updates, subscribe to our newsletter by clicking here.

 

Israel’s minister of finance has to provide his sign off before the rule amendment can be adopted. The authority will be soliciting comments on the proposal from the public until January 25.

Shmuel Hauser, the authority’s chairman who is set to retire, announced his plan to crack down on cryptocurrency-related companies at a conference last week. "I think the price of bitcoin is a bubble,” he said. “No one knows what’s behind it.”

Over the past several months, a series of Tel Aviv-listed companies announced plans to move into the cryptocurrency business and soon saw their stock price skyrocket. Regulators urged investors to be cautious, questioning the underlying value of companies whose stock performance depends on the popularity of bitcoin and other virtual currencies.

In December, shelf company Apollo Power Ltd. announced it had used solar energy to power cryptocurrency mining. Apollo’s stock price shot up, adding millions of dollars to the company’s market capitalization. Apollo later disclosed that the mining experiment had yielded 4 cents worth of Ethereum in 30 minutes, rendering the earlier announcement mute.

A lawsuit has been filed against Apollo by investors who allege the company had misled them causing them financial losses.

The proposed amendment targets companies seeking to be traded on the exchange as well as already-listed companies that shift their focus to cryptocurrencies. Officials carved out an exemption for companies with a minimum of 100 million shekels ($29 million) in equity that have been listed on the exchange for at least three years.

In the comments attached to the proposal, the authority said it is seeking to shield the public from high-risk investments in companies whose value may evaporate due to the volatility in the price of the cryptocurrency.

“Investing, holding or mining cryptocurrencies whose legal and regulatory standing is yet unclear comes with a relatively high level of risk, including risks that the average investor is unfamiliar with,” the authority wrote. “Investors face market risks including difficulty in evaluating the value of cryptocurrency-related assets, liquidity risks, and extreme price volatility.”

Investors are also vulnerable to fraud, cyber attacks and currency splits, the authority said, adding that cryptocurrencies are impacted by banking and regulatory challenges.