Israeli fintech hybrid: another block in the blockchain

Rage Comment : Israel will become the center of blockchain application and R&D, all because of the strong support provided by Israel's national defense construction for innovation. Although Israel's blockchain ecosystem is booming, Israeli regulators still "remain neutral". Some people are worried that blockchain will go the same way as Silk Road and Mt. Gox, and some people believe that it will take time for decentralized systems to replace traditional centralized systems. The problem facing regulators is not when to regulate or to what extent, but how to regulate.

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The burgeoning Israeli fintech market is innovating with blockchain technology, leaving regulators with little choice but to get involved. Prosecutor Roy Keidar analyzes the development and current status of blockchain in Israel.

Military factors

Although Israel is a small country, it has long been considered a hotspot for disruptive innovation and is becoming a leading force in blockchain innovation. The increasingly mature Israeli technology ecosystem, which boasts the highest concentration of technology companies outside of Silicon Valley, provides fertile soil for the development of distributed ledger technology.

The reason Israel is a fertile ground for technological innovation is that cybersecurity and digital currency play an important role in Israel’s national defense construction. The military provides a strong incubator for these fields. The current situation is reminiscent of the situation when the cyber industry was developed in 2000.

The combination of a profit-driven private sector and outstanding entrepreneurs brings in early capital inflows, which in turn attracts the attention of the government, which exercises regulatory power and allows for increased financial and human resources input, including the establishment of relevant support agencies, and provides material incentives for academics to conduct relevant research, which attracts everyone's attention.

Research and Development

Israeli universities are home to a number of blockchain research experts, including Turing Award winner Adi Shamir, a professor at the Weizmann Institute of Science, and Eli Ben-Sasson, a professor at the Israel Institute of Technology.

Adi Shamir

According to a recent report by global consulting firm Deloitte, there are dozens of Israeli startups in the private sector developing blockchain technology in a wide range of areas, including security, hardware, digital currencies, payment methods, peer-to-peer and social platforms.

For example, one startup offers a blockchain solution that eliminates the need for paper contracts when signing international shipping agreements. Such a blockchain solution can ensure security during the purchasing process and store cargo data online. Another startup has created blockchain data templates for use by banks and businesses.

The regulator’s dilemma

While the Israeli blockchain ecosystem is thriving, it is not surprising that Israeli regulators remain ‘neutral’ and that the future use cases and various impacts of blockchain technology are unpredictable.

Regulators around the world remain skeptical that digital currencies can allow individuals to circumvent oversight by banks and government agencies.

Scandals such as the Silk Road and Mt. Gox incidents have caused businesses to lose trust in Bitcoin. But in addition to concerns that Bitcoin could be used for crime, there is another reason for this resistance: any decentralized system cannot replace the long-standing centralized system in a short time, and regulators also need time to digest such changes.

Public and private institutions

To some extent, Israel is a special case, as there is no obvious friction between private and public institutions due to the small size of the Israeli industry.

We often see this situation in the rapidly developing field of financial technology. The pace of issuing regulatory systems in the banking field is usually very slow because it takes time to meet the needs of hundreds of startups in almost all financial fields, including payments, trading, lending, anti-fraud and insurance industries. Blockchain can provide relatively simple solutions to solve some complex financial problems.

Regulating decentralized systems

They form an 'Israeli Fintech hybrid' that is slowly but rapidly transforming a wide range of industries.

Therefore, regulators now find themselves at a crossroads of choice and remain calm. The pressure comes from learning to adapt to these new technologies, with the goal of encouraging and supporting them.

Some worry that this is too much regulation, or too soon. But the real question is not when or how much regulation to implement, but how to implement it.

At the same time, the thriving Israeli industry will continue to innovate with blockchain technology, ultimately leaving regulators with no choice but to get involved. If blockchain technology can be applied correctly, it will greatly promote the development of the Israeli industry.