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Israeli Supreme Court Rules in Favor of Cryptocurrency Exchange in Bank Dispute

The Supreme Court of Israel says Leumi Bank cannot block Bits of Gold’s account due to regulatory concerns, setting precedent for other crypto organizations.

The Supreme Court of Israel has declared that Leumi Bank cannot block the cryptocurrency exchange Bits of Gold’s account on the grounds of regulatory concerns, according to a report by Finance Magnates on June 3.

Despite the Supreme Court’s ruling against Leumi, the bank reportedly maintains its stance against dealing with the exchange. The report notes, however, that this ruling sets precedent for Israeli cryptocurrency firms to legally use traditional banking services in the region.

In 2017, the Israeli Supreme Court previously ruled in favor of Leumi in a separate case against Bits of Gold, in which the bank restricted the exchange’s account on the grounds that bitcoin (BTC) transactions could not comply with the country’s anti-money laundering (AML) laws.

In 2018, however, the Israeli Supreme Court ruled that Leumi Bank could not block account transactions on the grounds that they went to BTC exchanges, purportedly “websites that execute gambling transactions.” Further, Judge Anat Baron issued a court order temporarily barring Leumi from blocking Bits of Gold’s bank account.

Judge Baron commented that since there was no indication of any AML violations over five years of exchange transactions, there are not any grounds to continue blocking Bits of Gold’s account. Baron noted, however, that the decision to issue the court order did not prevent the bank from scrutinizing the exchange’s behavior or complying with their risk management policy.

In March 2019, the Israeli Securities Authority issued its final recommendations for cryptocurrency regulations. The report includes several ideas for how to support the cryptocurrency space in the country, including the establishment of a regulatory sandbox.

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Bitcoin (BTC) is a Taxable Asset, Not a Currency; Israeli Court Says

Bitcoin (BTC) is not a currency in the strict sense of the word and therefore falls into the category of a digital asset according to a recent sentence by the Central District Court in Lod, Israel. In this way, the holding of Bitcoins and the profits from operations with cryptocurrencies become taxable.

The decision was taken by Judge Shmuel Bornstein as part of the verdict of a dispute between The Israel Tax Authority and Noam Copel, founder of blockchain startup DAV.

Noam Copel: The man who argues Israel should not tax Bitcoin (BTC)
Noam Copel

Mr. Copel bought Bitcoins (BTC) in 2011 and sold them in 2013, generating a profit of nearly 2.3 million dollars. Copel refused to pay taxes on this profit, arguing that Bitcoin (BTC) should be treated as a foreign currency and that “his profits should be seen as Exchange rate differences received by an individual not in the course of a business, and therefore should not be taxed”.

The Israel Tax Authority argued that Bitcoin is not a currency, much less considered as such by any state, so it could not have that distinction. With that argument the public organism expected the judge to decide that profits from trading are liable to capital gain taxes.

Israel: Bitcoin is Crypto, But It is Not Currency

After reviewing the allegations, Jud Bornstein had to turn to other sources of law to make a fair decision because no legislation expressly lists Bitcoin as an asset or currency. Bornstein gave the reason to the Israeli government arguing that the legal definition of a “currency” according to the Bank of Israel implies that there must be some physical-concrete manifestation (something Bitcoin does not have).

Mr.
Bornstein, however, does not deny that the evolution of society may soon change
this perception. While the decision may reach the Israeli Supreme Court,
Bornstein’s judgment has provided one of the firsts Israeli legal
interpretations on the nature of Bitcoin.

Bornstein
explained that for there to be a need to change the law, Bitcoin must be used
and accepted as money by people in general (and not by a closed group).

“In my view, what will ultimately determine whether Bitcoin is a currency is the reality test. As soon as its use becomes widespread, the legislature will have to rewrite the law in such a way as to accommodate this, and we shall all benefit from these technological and monetary developments and from the ability of Bitcoin and other cryptocurrencies to serve as efficient, trustworthy, and widely accepted means of payment.

The post Bitcoin (BTC) is a Taxable Asset, Not a Currency; Israeli Court Says appeared first on Ethereum World News.

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Israeli Court Rules Bitcoin Is Not a Currency in Court Case Over Taxes on BTC Gains

The ruling is a setback for crypto entrepreneur Noam Copel, who will now have to pay tax on $830,000 in profits he made by selling bitcoin.

An Israeli judge has ruled that bitcoin (BTC) is an asset and not a currency, local news site Globes reported on May 21.

The judgment is significant because it means profits made by selling the cryptocurrency will now be liable to capital gains tax, Globes notes.

Noam Copel, who founded the blockchain startup DAV, had bought BTC in 2011 and sold two years later — making a profit of $2.9 million at today’s rates.

During the court case, he had argued that bitcoin should be regarded as a foreign currency, as fluctuations in exchange rates are not taxed.

But the Israel Tax Authority (ITA) argued differently, with the organization putting forward the idea that currencies must have some physical manifestation under the country’s laws.

Judge Shmuel Bornstein ruled that Copel had failed to prove that bitcoin met this requirement, or that it could be used as a viable alternative to fiat when he had sold the cryptocurrency six years ago. However, he indicated that the court’s attitude may change — describing his ruling as “for now.”

As things stand, the entrepreneur must now pay tax on $830,000 of the profits he made; however, Copel does have the option of appealing to Israel’s Supreme Court.

The ITA had first outlined plans to tax cryptocurrencies as property in February 2018.

Earlier this month, the United States Internal Revenue Service said it was prioritizing issuing guidance on cryptocurrencies after politicians in Congress warned there is still much ambiguity about how the asset should be taxed.

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FBI and Israeli Police Take Down Bitcoin-Enabled Darknet Listings Site

Israeli police and the United States Federal Bureau of Investigation have arrested at least two men and reported others.

Israeli police and the United States Federal Bureau of Investigation (FBI) have arrested at least two men and reported others in a takedown of a bitcoin-enabled dark web listings site, the Israeli police force announced in two official tweets on May 7.

The police revealed that a cross-border investigation successfully traced several suspects who allegedly founded and administered a darknet site — identified as Deep Dot Web in local media reports — which was reportedly a resource for finding illegal dark web marketplaces. Such listed sites hawk illicit goods, such as drugs, weapons, or stolen credit cards, the police alleged.

In a second tweet, the announcement continued to outline that:

“The owners of the site raked in millions of dollars through an ‘affiliate marketing’ method, thereby earning from every sale done through them. The payment for the transactions was carried out using bitcoin. The 2 suspects arrested in Israel will be brought before a judge for a hearing regarding their potential detention extension.”

While Israeli police confirmed the arrest of two individuals in their 30s in the local cities of Tel Aviv and Ashdod, Israeli newspaper JPost and technology media outlet Tech Crunch reported that further related arrests have also been made by cross-border investigators in France, Germany, the Netherlands and even Brazil.

As reported, darknet marketplaces are accessed using services such as the Tor browser, which uses so-called onion routing — a technology for anonymous information exchange — so that users can remain concealed and circumnavigate censorship by disguising their IP-address.

The Deep Dot Web arrests follow a joint operation by the German police and Europol last week to take down the dark web marketplace Wall Street Market. The action resulted in the seizure of millions in cash, reported six figure amounts in cryptocurrencies, and other assets, as well as the arrest of three German citizens.

While cryptocurrency and its history of usage in darknet dealings became notorious in the aftermath of the closure of the illicit marketplace Silk Road, a two-year study of the dark web ecosystem — published in February 2018 — claimed that bitcoin may be losing its cachet as the number one currency on darknet markets, reportedly due to users’ frustrations with network traffic and transaction fees.

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Ant Financial Joins $10 Mln Series A, Partners With ZKP Blockchain Privacy Solutions Firm

Ant Financial has participated in a $10 million Series A round and partnered with QEDIT.

Ant Financial, the financial affiliate of Chinese e-commerce giant Alibaba, has participated in a  $10 million Series A round for QEDIT, an Israeli blockchain privacy solutions firm that develops zero-knowledge proof (ZKP) technology. The news was reported by Israeli daily business newspaper Calcalist on May 7.

The Series A was reportedly led by MizMaa Ventures, and its closing was announced alongside partnerships with Ant Financial, major software firm VMWare and RGAX, a subsidiary of Reinsurance Group of America.

Both latter firms also participated in the financing round, alongside Meron Capital, venture capital firm Jovono, Collider Ventures and Target Global.

The partnerships will reportedly see the companies cooperate with QEDIT to review their privacy products and implement ZKP technology at a corporate level.

As Calcalist notes, QEDIT develops privacy solutions for enterprise blockchains that are compatible with data privacy laws, such as the landmark European Union-wide framework General Data Protection Regulation (GDPR).

As well as allowing for blockchain-powered and privacy-preserving data sharing, QEDIT’s ZKP technology has been designed to be used in audit and due diligence services for financial institutions, an earlier report has outlined.

Geoff Jiang — a vice president and general manager of Ant Financial Technology and Business Innovation Group — is cited by Calcalist as saying that:

“Ant Financial shares a common vision with QEDIT to protect data privacy and security. Robust privacy measures are critical to the ongoing development of the wider finance sector. Together with QEDIT, Ant Financial is committed to providing such capabilities as part of our blockchain services.”

QEDIT was reportedly co-founded by CEO Jonathan Rouach in 2016 and Ruben Arnold, both of whom have previously founded crypto firms, including crypto exchange Bits of Gold and LedgerLock — which provided security services for a range of digital assets and was subsequently sold to Digital Assets Holdings.

As reported in April, Dutch global banking and financial services corporation ING has recently introduced a new solution that extends its existing blockchain privacy-focused technologies such as zero-knowledge range proof and zero-knowledge set membership.

In fall 2018, Big Four auditor Ernst and Young launched its own prototype for a system that enables secure and private transactions to take place on the Ethereum (ETH) public network, using ZKP technology.

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US District Attorney Seeks to Retain Defendant in Crypto Shadow Banking Crypto Case

The District of Arizona Attorney is seeking to retain a defendant in custody in a case of allegedly shadow banking in custody as they are concerned he could flee.

The United States Attorney for the District of Arizona (DA) is seeking to retain a defendant in custody in a case of alleged shadow banking for cryptocurrency companies. In a court filing released on May 1, the DA states that they are concerned the accused will flee.

The filing follows the official announcement published by the Southern District of New York Attorney in April, ordering to charge an Arizona citizen Reginald Fowler and Israeli woman Ravid Yosef for allegedly operating an unlicensed money transferring business and bank fraud.

The recent filing asks the court to detain the defendant pending trial as he purportedly presents a risk of continued economic danger. Since the defendant purportedly has access to millions of dollars in bank accounts around the world and overseas ties that would facilitate the flight — among other factors — the Attorney office declares that the defendant poses a flight risk. The document specifically states:

“A consideration of the facts show that Defendant is a significant flight risk given his connections overseas, his financial means to support himself outside the United States, his disregard for this criminal investigation, and his potential involvement in other criminal activity.”

As Cointelegraph previously reported, in 2018 the accused allegedly worked for several associated companies that provided fiat currency banking services to cryptocurrency exchanges, where Fowler made numerous misleading statements to banks in a bid to open bank accounts further used to receive deposits from individuals purchasing digital currency. Fowler and Yosef purportedly falsified electronic wire payment instructions to cover up the true nature of their business.

The recent filing claims that “companies associated with Defendant have failed to return $851 million to a client of Defendant’s shadow bank.”

In recent international cryptocurrency-related crime news, a Toronto judge ruled in April that an online drug dealer Matthew Phan must pay his entire $1.4 million bitcoin (BTC) holdings to the state in what is reportedly Canada’s largest ever forfeiture. Phan, who dealt in illegal narcotics online, had tried to convince law enforcement he had amassed his 281.41 BTC (worth around $1.4 million at press time) through other activities.