Bank of Israel has released draft guidelines for the crypocurrency AML-CFT

The move hints the Israeli government's preparations to legalize and regulate the relationship between banks and virtual currency service providers (VASPs). The document cites the increasing involvement of customers in digital assets as the justification for the new policy: "Given the increase in customer activity in virtual currencies and the resulting increase in customer requests for money transfers, the Department of Banking Supervision has today issued a draft circular on managing AML-CFT risks arising from the provision of payment services to customers." The regulator highlighted the "high potential risk" of digital asset transactions due to the anonymity of digital wallets and referred to the need to establish currency identification mechanisms. For now, this task is reportedly split into two main components: performing rigorous risk assessments and clarifying the source of the money used to purchase the virtual currency, and the path between the virtual currency purchase and conversion to fiat. As the disclosure clarifies, banks will only be allowed to transact with entities that have a license to provide financial asset services issued by the Capital Markets, Insurance, and Savings Institution auditor. The draft amendment was submitted to the Banking Matters Advisory Council, which is expected to provide additional input to be considered along with comments made public by the Bank of Israel during the finalization of the guidelines. In November 2021, the Israeli government compelled VASPs to obtain operating licenses from the Israel Securities Authority and the Capital Markets, Insurance and Savings Authority. With AML-CFT guidelines for banks on the table, the country is getting closer to achieving a comprehensive framework for digital asset transactions.