In a bid to reduce systemic risk, the Israel Securities Authority has announced that it will not include companies operating in the cryptocurrency industry will not be included in the country’s stock exchange indices. News of the determination has been published alongside a public warning issued that seeks to inform prospective investors of the risks associated with cryptocurrency exposure.
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Israeli Cryptocurrency Companies Banned From Listing on Stock Exchange Indices
Israel’s financial regulator, the Israel Securities Authority (ISA), has announced that companies primarily operating in the cryptocurrency sector will not be included in stock exchange indices.
According to a rough translation, ISA Chairperson, Ms. Anat Gueta, stated “We decided to avoid exposure to passive investors for companies whose operations are mainly in [crypto]currencies,” adding “These are companies in which the investment is high risk, speculative and volatile.”
The ISA states that the determination has been made in response to “the exceptional trading in securities of companies on the Tel Aviv Stock Exchange who announced in recent months that they intend to operate in the cryptographic currency sector.” In some instances, the regulator asserts that just the announcement a company may be exploring blockchain technology “led to a sharp rise in share prices, even before they have true activity.”
ISA Seeks Amendment to Stock Exchange Regulation
The ISA has stated that it will “act to promote a temporary amendment to [Israel’s] stock exchange regulation, which will limit the entry into indices of companies whose main activity is the holding, investment, or mining of distributed cryptographic currencies.”
Israel’s financial regulator described the objective of the amendment as “prevent[ing] public companies operating in this risky and speculative field […] from entering the stock exchange indices and [being] included in the portfolios of passive investors.” The ISA hopes to introduce said amendment for “a limited period of one year,” after which the law “will be re-examined in accordance with developments in the market.”
The ISA has expressed concerns if it had not intervened, that the “combination of cryptographic and stock index companies would have let [to] mutual funds and ETFs […] acquire shares in these companies,” thus “indirectly expos[ing] passive investors to” the “potential for […] significant loss[es].”
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