In a significant move for Israel’s financial landscape, the Israel Securities Authority (ISA) has approved six Bitcoin mutual funds, set to launch on December 31, local media reports. This approval marks the first instance where Israeli investors can engage directly with Bitcoin (BTC-USD) through regulated mutual funds. The funds will be managed by major players in the industry, including Migdal Capital Markets, More, Ayalon, Phoenix Investment, Meitav, and IBI, all of which will commence operations simultaneously as stipulated by the regulators.
The management fees for these funds will vary from 0.25% to 1.5%. Notably, one fund is designed to actively manage its portfolio with the aim of outperforming Bitcoin’s market performance, adding a dynamic element to the investment options available. Initially, transactions within these funds will be limited to once daily, though there’s anticipation that future funds might offer continuous trading capabilities, reflecting a more flexible approach to crypto investments.
The approval comes after a prolonged period of advocacy from investment firms, who have been pushing for such an integration of cryptocurrencies into mainstream financial products for over a year. This development in Israel is somewhat of a follow-up to the U.S. Securities and Exchange Commission’s (SEC) approval of spot Bitcoin ETFs earlier in the year, which have seen an influx of more than $35 billion, highlighting the growing institutional interest in digital assets globally. Bitcoin’s value has more than doubled, showcasing its resilience and potential as an investment asset.
Israel, known as the “Start-Up Nation,” has a burgeoning crypto industry with approximately 174 companies focused on blockchain and related technologies, employing around 3,800 individuals. Despite this innovative edge, the sector has faced regulatory and banking hurdles. Banks in Israel have been notably cautious, often refusing to handle funds from crypto transactions due to concerns over money laundering and compliance, creating significant challenges for investors in managing their tax obligations. The Israel Tax Authority’s temporary measure allowing crypto profits to be reported via special accounts, extended until December 31, underscores the ongoing need for more permanent regulatory solutions.
Parallel to these developments, the Bank of Israel has been exploring the realm of digital currencies by working on a digital shekel. This initiative includes the release of an architecture paper and the establishment of a testing environment, indicating a broader interest in digital financial innovations beyond just Bitcoin.
Economically, Israel continues to thrive, with a reported current account surplus of $5.53 billion in the third quarter of 2024, up from a downwardly revised $4.89 billion in the previous quarter, driven by robust exports and investment inflows. Forecasts suggest that this surplus might expand to $7.8 billion by year’s end, painting a picture of economic stability that could support further financial innovations, including those in the crypto space.
This regulatory nod to Bitcoin mutual funds not only opens new avenues for investment but also signifies Israel’s cautious yet progressive approach towards integrating cryptocurrencies into its financial system. It reflects a broader global trend where traditional finance meets the digital economy, balancing innovation with regulatory oversight.
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