Shares of Israeli companies whose values have soared due to their bitcoin-based current or planned operations plunged Tuesday after securities regulator Shmuel Hauser said such companies would not be included in any Tel Aviv Stock Exchange indexes.
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That does not mean they should be banned from trading, he added.
“We won’t let companies whose value is based on the value of bitcoin to be included in the Tel Aviv Stock Exchange indexes. We’ll consider whether we won’t let bitcoin in its various costumes and similar currencies enter through the back door to trading on the exchange, until an appropriate regulatory framework is found for these kinds of financial products,” he said Tuesday.
Hauser, the chairman of the Israel Securities Authority, mentioned Natural Resource Holdings, whose shares have soared some 5,000% the past few months, to a market cap of 59 million shekels ($16.6 million), since it said it would shift its focus from mining for gold and iron to “mining” cryptocurrencies.
The share price was down 47% in Tuesday trade.
Hauser was also referring to former gaming company Fantasy Networks, whose share was down 27% Tuesday.
Hauser said in a speech there was a need for a suitable regulatory framework for such instruments given that the global market value of all digital currencies grew in 2017 to $300 billion from $18 billion.
After the speech, Hauser sent an official letter to TASE CEO Itai Ben Ze’ev, instructing him to block trade in these companies until legislation is drafted on the matter.
Bitcoin was quoted at $16,390 on the Luxembourg-based Bitstamp exchange, down 0.5%. The world’s best-known cryptocurrency hit a record price of $17,270 Monday, registering a near 20-fold increase for the year.
“Bitcoin ... seems to be out of control,” Hauser said, noting its price had characteristics of the technology bubble at the beginning of the millennium.
“There isn’t any information on supply and demand, and whether anyone is in control of that supply and demand,” he said. “That does not mean that bitcoins or alike are not to be considered, but it does mean that it should be examined at the country level by all regulators.”
Underscoring the concern, Fantasy Networks this week said it was studying the possibility of operating in the blockchain field — the technology underpinning cryptocurrencies — tripling its share price.
“Blockchain is a legitimate technology that will be a part of our lives,” said Hauser, who will step down next month after six and a half years as head of the ISA. “We will adopt it and it will enable us to lower costs for investors.”
He said there needs to be a reevaluation of regulatory schemes in financial technologies — including crowdfunding, robot trading and trading platforms — since securities laws were enacted years ago.
Hauser and other ISA officials are concerned that the Israeli companies in the binary options industry, which was recently banned, will switch into bitcoin operations. The binary options industry has been accused of defrauding thousands of investors who in effect bought into gambling schemes.