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Screenshot of a breaking news alert e-mail from Q2 2017
After months of behind-the-scenes lobbying and resulting delays, Israel’s Binary Options bill was passed in the country’s Knesset parliament late Monday, in a (rare) unanimous 53-0 vote. The vote came in the opening day of the Knesset’s winter session, after intense industry lobbying efforts were able to delay the Binary Options bill from being introduced during the summer session which broke at the end of July.
The bill will now become law in three months, at the end of January 2018.
The Israel Binary Options Law is a watered-down version of the original bill which was drafted mainly by the Israel Securities Authority which is largely charged with policing Israel based brokerages, but still contained key clauses which a number of well-financed lobbyists, backed by some of the leading Israel-based Binary Options platform providers, were trying to remove.
The original legislation was worded such that an Israel based brokerage would need to be licensed in the jurisdiction from which it took clients, whether the broker offered Forex, CFD, or Binary Options trading. That part, as noted above, was removed and the bill was watered down to ban only Binary Options.
However what was left in the bill, despite the frenzied efforts of lobbyists, was the banning of not just running a Binary Options brokerage operation, but also a ban on all aspects connected to running a Binary Options business – provision of software services required to run a brokerage, provision of payment services for the purposes of binary options trading, and the marketing of binary options services.
The legislation considers the operation of a Binary Options brokerage in Israel, including the related “services” mentioned above, to be a criminal offense punishable by up to two years in prison. It will also be considered a contravention of Israel’s anti-money laundering (AML) laws, which can carry further prison time and monetary penalties.
However, the new legislation will basically allow the same people who ran Binary Options firms from Israel to continue running unlicensed brokerages from the country targeting traders virtually anywhere in the world – as long the products they market and trade don’t include the legislation’s fairly narrow definition of a Binary Option. And indeed, many of the now-former owners and managers of Binary Options brokerages have reinvented themselves as cryptocurrency brokers, offering leveraged trading in Bitcoin, Ethereum, and other popular digital currencies from newly branded websites. Some have also turned to ICO scams, raising money for not-yet-existing businesses.
The legislation will, however, likely spell the end for the Binary Options platform companies in Israel. As we reported back in June, in anticipation of the bill becoming law some platform providers such as TechFinancials Inc (LON:TECH) have downsized in Israel and moved jobs to places such as Cyprus and Ukraine. As Binary Options remain a hotly traded product in certain areas such as China and the Far East, with much of the trading occurring on these Israel-based platforms, we believe that the remaining Binary Options platform companies will simply relocate their operations outside the country, as TechFinancials has.