Israel puts the brakes on cash to spur digital payments

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Author­i­ties in Israel on Mon­day has in put in place fur­ther restric­tions on cash pay­ments as a means to com­bat ille­gal activ­i­ty and spur dig­i­tal pay­ments in the country. 

Since Jan­u­ary 2019, Israeli busi­ness­es and con­sumers have been sub­ject to lim­its on cash pay­ments under the Law for the Reduc­tion in the Use of Cash. It’s aimed at shift­ing the country’s cit­i­zens and busi­ness­es toward dig­i­tal pay­ments, allow­ing author­i­ties to more eas­i­ly track tax eva­sion, black mar­ket activ­i­ty, and mon­ey laundering.

From August 1, the lim­its on cash pay­ments have been tight­ened to 6,000 Israeli Shekel (NIS), equiv­a­lent to $1,760 Unit­ed States dol­lars (USD) for busi­ness trans­ac­tions and NIS 15,000 ($4,400 USD) in per­son­al transactions. 

Fur­ther restric­tions are expect­ed to fol­low in the future, pro­hibit­ing the stock­pil­ing of more than NIS 200,000 shekels ($58,660 USD) in cash at pri­vate residences.

Tamar Bracha, who is report­ed­ly in charge of exe­cut­ing the law on behalf of the Israel Tax Author­i­ty (ITA), recent­ly told Media Line that lim­it­ing the use of cash will make increase the dif­fi­cul­ty of crim­i­nal activ­i­ty, stating: 

“The goal is to reduce cash flu­id­i­ty in the mar­ket, main­ly because crime orga­ni­za­tions tend to rely on cash.”

Mean­while, the new lim­its placed on hard-cash trans­ac­tions have been seen by some as a good sign for future cryp­to adop­tion in the country. 

On July 30, Cryp­to influ­encer Lark Davis told his 1 mil­lion fol­low­ers on Twit­ter that Israel is nei­ther the first nor last coun­try to intro­duce such restric­tions, and took the oppor­tu­ni­ty to ref­er­ence Bit­coin in his post. 

Mean­while, strate­gic investor Lyn Alden, founder of Lyn Alden Invest­ment Strat­e­gy said that the trend “will prob­a­bly con­tin­ue to oth­er coun­tries over time.” 

CBDCs & crypto regulation

The coun­try is also one of sev­er­al nations in the region explor­ing cen­tral bank dig­i­tal cur­ren­cies (CDBCs), hav­ing first con­sid­ered a CBDC at the end of 2017. 

In May, the Bank of Israel revealed the respons­es to a pub­lic con­sul­ta­tion around its plans for a “dig­i­tal shekel,” indi­cat­ing that there was strong sup­port for con­tin­ued research on CBD­Cs and how it would impact the pay­ments mar­ket, finan­cial and mon­e­tary sta­bil­i­ty, and legal and tech­no­log­i­cal issues.

In June, the Bank of Israel revealed it had con­duct­ed a lab exper­i­ment exam­in­ing user pri­va­cy and smart con­tracts’ use in pay­ments, mark­ing its first tech­no­log­i­cal exper­i­ment with a CBDC.

The coun­try is also in the process of cre­at­ing a reg­u­la­to­ry frame­work around dig­i­tal assets. Dur­ing this year’s annu­al Israel Cryp­to Con­fer­ence in May, Jonathan Shek of Oz Finance revealed that Israel’s finan­cial author­i­ties had been prepar­ing a com­pre­hen­sive and holis­tic reg­u­la­to­ry frame­work for dig­i­tal assets.

While he didn’t give an exact date, Shek teased it would come in the near future because the Israeli gov­ern­ment was keen to fos­ter the growth of the cryp­to indus­try in their state if done in a respon­si­ble manner. 



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