Israeli Crypto Exchange to Inform Tax Authority About Large Transactions

Israel's Tax Authority is taking another step forward in regulating cryptocurrencies. The authority has reached an agreement with Israeli cryptocurrency exchange Bits of Gold Ltd., a major hub of crypto transactions for local traders, which will see the exchange pass on information regarding large deposits, according to three people familiar with the matter. The purpose of the agreement, these people said, is the prevention of money laundering and tax evasion.

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Israeli authorities and financial institutes tend to regard crypto-related transactions with suspicion, as their anonymized, encrypted nature make the verification of their origin difficult. Israel’s Prohibition on Money Laundering Law requires that suspicious deposits and withdrawals and all deposits exceeding NIS 50,000 (around $14,700) be reported to the Israel Money Laundering and Terror Financing Prohibition Authority (IMPA). In such cases, account holders are required to turn in documents that verify the legitimacy of the deposits.

Under Israeli law, Bits of Gold, which has more than 50,000 registered users in Israel, is required to pass such information to IMPA, but not necessarily to the tax authority, as the exchange of information between government entities is limited due to privacy concerns. In 2002, an Israeli court rejected a request by the country’s tax authority to receive a list of clients from a bankrupt bank, stating such information is protected under privacy laws.

The local tax authority audited Bits of Gold last month, according to one of the persons familiar with the matter, targeting not the company itself but its large-scale clients. The agreement will see the exchange pass on information about clients who made transactions of over $50,000 in total in the past 12 months.

In recent months the authority has been increasing its focus on crypto investors, one of the people familiar with the matter told Calcalist. Bits of Gold is just the first company operating in the industry to be approached in such a manner, this person said.