Crypto, Law and Justice - Bar Association Conference

The lectures and discussions took place at the Tel Aviv District Bar Association. The lectures discussed the effects of virtual currencies such as Bitcoin, Atherium, Lightcoin and the like on the existing legal system, and vice versa - the effect of the existing legal system on virtual currencies.

The first lecturer was Dr. Maor Even Chen, Deputy Director of the Economic Department of the State Attorney's Office. The State Attorney's Office is responsible for prosecuting criminals, while the Economic Department handles economic offenses, such as money laundering, tax offenses, etc.

In his lecture, Dr. Even Chen spoke candidly and noted the following:

"There are quite a few legal issues that can be thought of in the context of those currencies ... there is no doubt that the legal questions that would have arisen: for most of them we still have no answer. The bottom line of my lecture will remain, today at least, with more questions than answers. Only we have not been examined in court, but have not yet been examined even among the law enforcement authorities ... I estimate that for most things we are still far from giving an answer, and not only in Israel, by the way, it is not ours here [in Israel] there is some problem, but in the whole world Today there are clear legal precedents for these issues. "

In the area of ​​buying and selling illegal products or services, Dr. Even Chen noted the obvious loophole that exists in the inability to locate the buyer or seller. Therefore, the identity of the buyer and the identity of the seller are completely confidential and it is not possible at the technological level to locate any of the parties to the transaction.

"You go through the money route and you usually if you do the job properly, you can come and find out who is really behind that deal and from there move on. Once we talk about buying and selling in these areas using virtual currencies, we definitely encounter some barrier, as an authority. Enforcement, a barrier that I assume will try to find tools to deal with over time "

Dr. Even Chen also expanded on the field of taxes and the ability of the authorities to collect taxes from citizens:

"Of course the very use of these currencies can be a daunting challenge for the authorities. Once people can buy, sell, run a business through the use of virtual currencies, then a large part of the tax authorities' ability to come and examine and find out exactly what the business's revenue is. Earns, what is really his expenses, he may be severely harmed because if I accept the money as a virtual currency that I can keep it where the chance of the tax authorities getting to it is very small, then we may actually be exposed, again, to a lot of significant economic activity that is actually Hidden from the eyes of the tax authorities. "

Another issue that came up in his lecture was money laundering. Money laundering is an act that aims to launder money or property that its source transfers. For example, if a person broke into a jewelry store (offense) and stole three diamonds (property), the burglar would try to forge purchase receipts to show that he purchased the diamonds and did not steal them (money laundering). Regarding the field of money laundering, Dr. Even Chen noted the weakness of the existing system for dealing with virtual currencies:

"Here too, this is an area where there are more questions than answers today because we are at the very beginning in this context. ... The ability to transfer payments anonymously without going through the regular banking system is a very big opening for money laundering, terrorist financing and an opening In general, it can be dealt with ... In fact, a full reporting regime is the basis for the very activity of the Anti-Money Laundering Authority, and it is clear that when we talk about virtual currency activity then it is actually off the radar - out of the picture - of the same reporting regime we So careful to maintain and maintain it ... if we sum up the point of money laundering ... the big challenge for the authorities today is to try to find a way to apply the same reporting regime, to apply the same regime of information transfer that exists for all other currencies also on currencies "Virtually. And you can certainly try to do that, but it requires cooperation ... internationally, and it requires cooperation from the issuer of those coins."

Finally, Dr. Even Chen noted:

"I think any attempt to regulate the very activity, and the supervision and protection of investors in currencies will require cooperation that does not exist today in anything else, because we will actually need cooperation not only with the country here and not just with a group of countries, but actually need "International cooperation, wherever a certain type of currency is issued - that people can buy and sell - there will be a similar series or the same series, because otherwise it will not work. Therefore, it is a very, very complex issue that I assume will take a very long time."

Following Dr. Even Chen's lecture, a lecture was given by Dr. Gitit Gur-Gershgoren, Chief Economist and Director of the Economic Department of the Securities Authority. Dr. Gur-Gershgorn's lecture focused on the field of ICOs, the issuance of new virtual currencies.

ICO is short for Initial Coin Offering. This is a term that represents an entire industry of raising capital on a huge scale in 2017. ICO is a very similar operation to an IPO. Some company creates a new type of virtual currency, in the amount of several million coins of the same type, and sells it to the general public to raise equity at a value that does not fall short of the huge amount of money that can be raised on the stock market.

In contrast, the issuance of shares or other securities on the stock exchange requires a long list of threshold conditions that must be met, such as seniority, minimum equity, various documents and a long and expensive procedure. Issuing securities on the stock exchange without complying with these conditions constitutes a securities offense, which is a criminal offense punishable by imprisonment. Apparently ICOs are not required for a variety of these conditions and so in the past year have been a preferred option for startup offerings. For more information on ICOs click here.

Dr. Gur-Gershgoren noted the following:

"One has to keep in mind that at the moment there is no oversight, no apparent regulatory requirements ... why ostensibly, because the law exists, and if you offer securities whether it is through a token [currency] or whether in any other way, you still have to comply with the law."

You can hear the full lectures (in Hebrew) at the link on Facebook:

https://www.facebook.com/tlvlawbar1/videos/10154961496662397/

In conclusion, it can be clearly understood that virtual currencies based on blockchain technology pose no simple challenges to law enforcement agencies when it comes to economic offenses such as securities issuance, tax offenses, money laundering offenses, and making illegal transactions.

However, keep in mind that blockchain technology is the future. Just as we do not think to ban the use of cars just because of the number of traffic offenders, so too we should not ban the use of technology just because of its shortcomings in the eyes of the authorities. Do not "pour the baby with water" and keep the technology free.