- Israeli traders are unable to deposit profits and are helpless since banks have locked them out.
- CEO of Bittax says banks do not want the additional responsibility of anti-money laundering snafus.
Israeli crypto traders have turned to banks and regulators after being unable to deposit profits. According to Haaretz, an Israeli media outlet, due to the unfamiliarity with technology. Around $86 million in unpaid taxes on crypto trade earnings have piled up as banks have refused to accept deposits. Gross told Haaretz:
“The tax authority is aware of the problem, but they say the ball isn’t in their court. I’ve tried working with almost all the banks, but the minute they hear the word ‘Bitcoin’ they freeze up.”
Gross stated that he has regularly paid his tax bills to the Israeli Tax Authority since 2011, but after 2017, things haven’t gone well with the bank. Presently, Israel taxes virtual currency profits at a capital gains rate of 25% rate for individuals and 47% for corporations. However, the tax authorities are not the issue.
Earlier in May, the country’s court ruled that Bitcoin is not a currency, but an asset. It ruled against Noam Copel, the founder of DAV.Network saying cryptocurrencies are taxable events. Copel, however, argued that Bitcoin is a foreign currency and hence non-taxable.
Israeli Bitcoin Association’s Legal Counsel Jonathan Klinger said that all major banks operate under a tight crypto policy. Trading deposits are not accepted and Fintech firms working with cryptocurrencies are similarly blackballed. He says it’s in the bank’s interest to keep cryptocurrency at arms reach:
“Co-operation from banks seems almost impossible. These actions might have been made if the policy did not originate from concerns of money laundering, but in order to eliminate competition that the cryptocurrency world has with banks.”
Gidi Bar Zakay, former Deputy Commissioner of the Israeli Tax Authority and current Bittax CEO, says that regulators set the banking industry’s pace. Without proper guidance, banks do not want the additional responsibility of anti-money laundering snafus:
“In the past, crypto-related capital could be transferred to some banks in some cases, but in recent years, the banks tightened their self-policy on businesses or individuals operating in the field. They are now waiting for guidelines from the Bank of Israel.”