Israeli government seeks to track crypto holdings over $ 61,000

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The Israeli government is stepping up efforts to deter tax evasion and close loopholes for would-be money launderers in a war on black capital. Among the measures outlined in a new bill released by the Ministry of Finance this week, a new legal requirement is proposed to place cryptocurrency users under increased scrutiny.

The proposed law would require cryptocurrency users who bought 200,000 Israeli shekels ($ 61,000) worth of cryptocurrency or whose crypto holdings are currently worth the same amount and more to file a report with the Israeli tax authorities.

This reporting obligation would apply to any Israeli citizen who has held, personally or on behalf of a child under the age of 18, cryptocurrency of a value equal to or greater than this amount on one or more days of the fiscal year. The bill specifies that:

Virtual currencies have become commonplace among the public and they are practically traded as an asset on the exchanges. Digital parts can be broken down into small units, transferred relatively easily electronically, and are not subject to any monitoring or inspection. Under these circumstances, virtual currency is a convenient and efficient way to conceal income, accumulate undeclared assets, and launder money.

If approved, the introduction of this measure would increase state revenue by around 30 million shekels ($ 9.2 million) in 2022 through an additional tax.

According to a report by Israeli business newspaper TheMarker, Meni Rosenfeld, president of the Israeli Bitcoin association, wrote a letter to Israel’s tax administration chief Eran Yaacov earlier this week. He argued that the extended reporting requirement would create a Bitcoin Holders Database (BTC) something new compared to any other asset.

Rosenfeld further argued that due to the volatility of digital asset prices, crypto investors could qualify for a reporting requirement one month and then soon after falling below the threshold. He wrote that the decision to hastily make this amendment to the law without any dialogue or understanding of its implications significantly compromises investors’ rights to a hearing and undermines the effectiveness of the proposed legislation.

Related: Israeli Defense Minister Allows Seizure of Hamas-Linked Crypto Accounts

Israeli daily Globes also cited Rosenfeld’s objection that the law would unduly discriminate against Bitcoin holders, and view them as potential criminals. According to him, the proposed measures go against the grain of facilitating access to the digital economy more broadly, a market that already faces significant regulatory challenges.

Tax lawyer Itay Bracha told Globes the law was another aggressive step authorities took to become a Big Brother. The ruling makes it clear that the state does not trust taxpayers to declare and pay what they owe correctly. Bracha also noted that reporting requirements are not mandatory in Israel for investors who trade stocks or other assets, despite the classification equivalence between them and cryptocurrencies.

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