One of the largest banks in Isreal, Leumi Bank, announced it will begin accepting cryptocurrency trading, according to the company’s press release held in the last few days of March 2022. Using its digital product, pepper invest, Leumi will allow its users to trade Bitcoin and Ethereum, with other tokens soon to be added. We expect many top proof-of-stake coins to be added to Redot trading platform over time because the prospects of earning passively through staking would appeal to the Israeli population.
This is coming days after Leumi partnered with a major Bitcoin infrastructure company; Paxos, and this will imply Israelis cannot trade, hold, or stake cryptocurrencies as they do in exchanges. Just that this time, there is an easy connection between the bank and its crypto outlet.
Although there is no planned date for the plan to go live, the information we have at our disposal indicates that the move will only have Bitcoin and Ethereum tokens to start with, and other cryptos will join in later. The minimum deposit amount will also be placed at 50 shekels (roughly 15.5 dollars). There might also require some regulatory oversight before the deal goes through.
Another important piece of information put forward showed that Pepper will be in charge of tax collection, and users will not need to go through the stress of calculating how much taxes they need to pay.
Israel’s involvement in cryptocurrency is an interesting one. Although the country boasts of some of the high-end blockchain companies, it had a lot of restraints in local crypto endeavours. The tipping point came when the government decided to classify cryptocurrencies as assets. This move was made to increase taxes, but in the long run, it pursued many crypto companies from the country. Why? Is it that Israeli crypto companies did not want to contribute to the nation’s development? No. the tax structure in Isreal for assets is enough to trigger reactions from people. First, assets are taxed 25% for capital gains. Then they could also see a 17% tax on value-added tax, coupled with a 23% corporate tax. If you fall in the category of those with big returns, you could end up paying 3% for the high revenue taxes.
Did this move allow many to switch to decentralized exchanges? Israeli laws opined that decentralized exchanges can be likened to trade by barter and would not be exempted from taxes.
Banks supported this claim; also, there was a nationwide clampdown on crypto activities, and it involved the closure of accounts related to cryptocurrencies. Surprisingly, Leumi bank, which has just highlighted its plan to accept crypto trading and crypto-related activities, was at the heart of this. It was popularly known for restricting the bank account of a crypto exchange in the country before a court order overturned the decision, stating that account closure is not in the jurisdiction of Leumi Bank.
Perhaps it would be safe to say that the citizens prevailed over the government with their constant pressure to accept cryptocurrencies. Instead of banning them, the government has started looking toward regulation and promoting crypto infrastructures.
This is a major development, as it indicates a move towards crypto adoption in the Asian continent. Other Asian countries like Singapore have exchanges that are already giving crypto offerings to their retail clients. A notable example is DBS, the bank announced in its last quarterly earnings that one of its plans for the coming quarters is to improve its crypto offering, and the timeframe set for execution is between the end of 2022 and the beginning of 2023.
Major South Korean bank, KB Bank, is also planning for the nation’s first investment fund with exposure to cryptocurrencies. We are unsure if this provision will come in the form of an index fund or ETF, but if there’s anything we can be certain of, it is that the fund will have pockets of NFT projects and crypto tokens. KB bank is not the only one in this circle. Other banks, both in South Korea and outside, are working towards this.
We have seen Financial institutions in the US propose crypto Spot ETFs to the SEC, but for several reasons, Crypto spot ETFs are only available outside the US. US citizens have access to Futures ETFs, though.
It would be interesting to see how having cryptocurrencies traded in banks will influence Ethereum’s hash rate. It is quite surprising that a country known for being a leading innovator in emerging technologies waited for this long to come to terms with cryptocurrencies, but as it is commonly said, it is better late than never. The effects of this adoption will be noticed on the Ethereum block explorer, and we hope the Ethereum 2.0 will have gone live to mitigate the traffic influence on the Ethereum network.
