Israel’s Big Crypto Winners Have a Hard Time Cashing Out

Bitcoin’s meteoric rise generated impressive returns for investors who jumped on the bandwagon early enough, but in Israel, regulatory obstructions mean that converting that profit to fiat currency is nearly impossible in large amounts.


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Cryptocurrency can be converted to cash using several methods, the most popular of which is exchanges like Coinbase. Other options are peer-to-peer marketplaces and bitcoin prepaid cards.


Bitcoin Change in Dizengoff Street. Photo: Orel Cohen



The largest exchange is based in the U.S., but it is currently inaccessible to Israelis.


For those who do manage to convert their digital currency, depositing the money into a bank account in Israel poses another obstacle. That’s because of provisions contained in Israel’s Prohibition on Money Laundering Law, which requires Israeli banks to automatically report suspicious deposits and all deposits exceeding NIS 50,000 (around $14,700) to the Israeli Ministry of Justice. In these cases, account holders are required to turn in documents that verify the legitimacy of the deposit’s origin.


However, the anonymized nature of the cryptocurrency industry means Israeli banks refuse to accept such deposits, fearing they are illegally gained.


“The anonymous character of virtual coins means they can be used, and are indeed already used, for money laundering, criminal financing and similar activities,” said Nadine Baudot-Trajtenberg, deputy governor of Israel’s central bank, in a parliamentary committee meeting a few weeks ago.


“Beyond the risks posed for the customer, the action poses risks for the banks,” Ms. Baudot-Trajtenberg said. “If the banks are suspected of money laundering, they could face repercussions from the authorities not only in Israel but also globally, and be at risk of severe sanctions.” Therefore, she added, each bank must define whether it’s a service the…


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