Israel’s Securities Regulator Asks Private Sector for DLT Proof-of-Concepts

The Israel Securities Authority (ISA) intends to draft a regulation for distributed ledger technology-backed (DLT) digital asset exchange platforms, according to ISA Chair Anat Guetta.

ISA unveiled the plan at a Jan 20. conference near Tel Aviv, announcing it seeks to offer a “a complete digital value chain for investors” including digital assets registered, traded and settled using DLT. It is now calling on the private sector to pitch the regulator with proof-of-concept DLT trading systems.

“After this stage is concluded, we will create relevant regulation that will make it possible to introduce digital platforms in Israel's capital market,” Guetta said at the conference.

For Israel and the chief securities regulators who attended the Jan 20 conference, DLT offers more than just an evolution in their capital markets – it’s now a market imperative. Multiple officials spoke of how new, lower-cost DLT platforms could open financing opportunities to new market players, meeting notes show.

It could also set a precedent for other securities regulators, Guetta said.

ISA’s endorsement of DLT comes after a special committee studied the technology for six months, considering everything from smart contracts to token issuance.

“The committee concluded that DLT technology has transformative potential for Israel's capital market, and the ability to place it at the forefront of global technology,” Guetta said at the conference.

In a 54-page study of DLT’s history, use cases in other countries, potential benefits and legal implications in the Israeli context, the committee found DLT could offer faster settlement times and streamline clearance. It highlighted the advantages for initial public offerings (IPO).

“The greatest promise of using DLT in capital markets is in the field of IPOs, trading and clearance,” the committee’s final report read. “It includes reducing associated costs, reducing systemic economic risks, developing an innovative financial environment and even opening up the capital market to companies that were previously uninvolved.”

The ISA is no stranger to employing DLT. Its secure “Yael” messaging platform is based on a blockchain, as is a shareholder voting platform and a regulatory document archive.

Editor’s note: Some comments in this article have been translated from Hebrew.