(photo credit: REUTERS/Jim Urquhart)
The Bank of Israel is contemplating how to deal with the virtual currencies such
as Bitcoin, mulling whether and how to regulate or recognize them, Army Radio
“The Bank of Israel is following global development in
the field, with an emphasis on policy steps and regulation, and examining the
need for regulation of one kind or another regarding currencies that are
electronic, virtual or similar,” a central- bank spokesman told The Jerusalem
According to Army Radio, the Justice Ministry met with the
Bank of Israel last week to discuss the implications of the virtual currency,
particularly its susceptibility for laundering and illicit
“We strive for a dialogue with the regulators to deal with
the Bitcoin issue in Israel,” Yonatan Roash, a member of a pro-Bitcoin group,
told Army Radio in an interview. “The use of Bitcoin in Israel is only growing.
I think that the regulators understand that Bitcoin is not going away.” The
amount of shekels being swapped for Bitcoins each month may have already reached
tens of millions, he said.
The virtual currency, created by a mysterious
hacker called Satoshi Nakamoto (who has since disappeared), has made headlines
in recent weeks as it breached the $1,000 mark for the first time, a meteoric
rise from the $70 it was trading at just five months earlier. The currency has
no central bank and no centralized authority governing its use, which makes it
appealing as a virtual, cross-border currency.
But it has its drawbacks
as well. As its price fluctuations demonstrate, it is not yet a reliable store
of value, an important feature of functional currency.
The inability of
any one body to control the supply of Bitcoins exacerbates the problem, though
proponents also note that no central bank could ever print more Bitcoins and
inflate away their value.
Its near anonymity makes it attractive for
illicit transactions as well, a problem that government oversight may be able to
The Bank of Israel isn’t the only central bank trying to deal
with the revolutionary currency. US Federal Reserve Chairman Ben Bernanke sent a
letter to Congress in late November saying the virtual currency “may hold
long-term promise, particularly if the innovations promote a faster, more secure
and more efficient payment system.”
Shortly thereafter, the deputy
governor of the People’s Bank of China, Yi Gang, said the bank could not yet
recognize Bitcoin as a legitimate currency, but it would keep its eye on the
currency for the long run.