Does the Cash Restriction Act apply to virtual currencies?

The Cash Restriction Law, or in its official name, the "Law for Reducing the Use of Cash, 2018", is intended to reduce the use of cash - banknotes, as well as checks without specifying the name of the beneficiary ("Blanco" checks, "on the part") .

The law actually limits the amount that can be given and received in cash, and imposes fines for making cash transactions in amounts higher than these restrictions.

This limit on the amount of cash applies to businesses, as well as to a large number of people. For example, limiting the receipt of payment from tourists, limiting the receipt of wages in cash, receiving a donation in cash, receiving a loan in cash and more.

The limit for a dealer to receive cash is NIS 11,000, and for a person who is not a dealer to receive cash is NIS 50,000 - and this is as of 2021.

The definition of a "dealer" is "a person who sells an asset or provides a service in the course of his business, including a non-profit," and the definition of a non-dealer is any person who has no business, including a dealer but whose transaction is not within his business.

Example of a dealer restriction: It is not possible to purchase a sofa in a furniture store in cash in the amount of NIS 12,000 or more.

Example of limitation of a person who is not engaged: It is not possible to buy a used car from a private person in cash in the amount of NIS 51,000 or more.

Towards August 2022 these amounts will be significantly updated downwards. TheMarker website, October 27, 2021, wrote the following:

"The government is tightening the restriction on large transactions in cash: from August 2022, payment in businesses in cash in the amount of NIS 6,000 or more will be banned. Today, this ban only applies to the amount of NIS 11,000."

Does the Cash Restriction Act speak of accepting payment in Bitcoin?
Bitcoin is known to be the first virtual currency created in the world.

We will examine the definition of "cash" in the current legislation. The definition of "cash" is "banknotes and coins that are legal practice in Israel, as well as foreign currency."

Legal meaning is the official currency used in the state, which the state authorities must accept as payments for taxes and fees.

Ostensibly according to this definition, Bitcoin is an asset that is not a legal practice in Israel, nor is it a foreign currency.

is that so?

not exactly. According to the definition of the Bank of Israel Law, "foreign currency" is "banknotes or coins that are legal practice in a foreign country and are not legal practice in Israel." (We will note in a boxed article that there seems to be a lot of irony when for the purpose of defining "foreign currency", the Cash Restriction Law refers to the definition found in the Bank of Israel Law, which is based on the physical form of money, i.e. its form as cash).

In 2021, the state of El Salvador adopted Bitcoin as a legal process, thus in our opinion Bitcoin has become a "foreign currency" as defined in the Bank of Israel Law, and in the Cash Restriction Law.

Hence, as we call it, it is not possible to pay in Bitcoin at values ​​greater than the quantitative restrictions which are written in the Cash Restriction Act.

What about other virtual currencies?
As mentioned, Bitcoin is known to be the first virtual currency created in the world, but it is not the only virtual currency. Today there are several thousand virtual currencies, some more familiar, some less. But Bitcoin is the only virtual currency that has officially become, in our opinion, a "foreign currency" as defined in the Bank of Israel Law.

Ethereum
Etherium is another virtual currency different from Bitcoin. Etherium is a currency that has not been adopted by any country as a legal tender. Since Etherium is not a legal process, in our opinion payment through Etherium is not limited to amounts under the Cash Restriction Act, and Etherium can be given and received freely with no amount, as payment, as a gift or for any other legal use, including the purchase of real estate by currency Virtual. (See our article "Buying an apartment using virtual currency, is it possible?").

However, Ethereum, like most virtual currencies, has one major drawback. It is volatile, and can cause large losses (or gains) between the date of receipt and the date of its real-time item (shekels or dollars).

USDT
USDT is a type of virtual currency, whose value is almost completely linked to the dollar. This is an abbreviation of US Dollars Tether. The word Tether means "tied" or "refers to" or "fastened to". One USDT currency is worth one US dollar. Therefore, it is a very common virtual currency, widely used by savvy people.

Because the USDT is linked to the dollar, it is not volatile and can be kept for a relatively long time without being exposed to the risk of bitcoin volatility. In doing so the USDT solves the problem that all other virtual currencies have. The main risk in this currency is the same risk of holding dollars or investing in stocks or dollar bonds - the dollar against the shekel may fall over time and create a loss.

Here too, since the USDT is not a legal process, in our opinion payment through the USDT is not limited in amounts under the Cash Restriction Act, and USDT can be given and received freely with no amount limit.

At this point, it should be noted that this article is not intentionally written to provide legal advice and should not be relied upon when performing financial transactions in virtual currencies; In order to obtain legal protection against the fines contained in the Cash Restriction Act, one must obtain a professional opinion document signed by an attorney who is knowledgeable in the field of virtual currency faucets.

If you plan to make any transaction, receive or give a virtual currency in an amount higher than the said amounts, we recommend that you contact us and get a signed legal opinion addressed to you which confirms the legality of the transaction. Contact us now and get a quote for writing a legal opinion for you!