To improve internal cybersecurity, the Israel Securities Authority (ISA) has implemented blockchain technology for its messaging and information systems.
The Israeli government agency responsible for capital markets and securities regulation recently announced the improvement to its "Yael" system, which is used to deliver communications to bodies subject to ISA regulation. As reported by The Times of Israel, the ISA describes the development as adding "another layer to ensuring the credibility" of information relayed to the bodies under its jurisdiction. The ISA explained:
"The technology verifies the messages' authenticity, prevents fraud, and prevents them from being edited or deleted. Additionally, the system prevents the option of denying that a message was received from the ISA."
The ISA appears to be taking advantage of one of blockchain technologies key strengths: its immutability.
The ISA has employed IT company Taldor to complete the blockchain integration over a three-month period.
The government body also stated, "The embedding of the technology in the ISA's information systems is in line with its vision to promote financial innovation in the capital market." The director of the ISA's Information Systems Department, Natan Hershkovitz, said the agency was witnessing a growing trend in the financial field "to embed innovative and revolutionary technologies."
Hershkovitz believes the move will make the ISA one of the leading agencies in Israel's public sector, as well as one of the leading global authorities in "securing the information provided to the public."
Israel's securities regulator plans to add blockchain to two more internal systems. First, an online voting system called "Etsba-on," which will enable investors to participate in meetings remotely. Votes cast on the system will be blockchain-verified to secure the voting process. The second future application is in a system called "Magna," used to record reports received by bodies under the ISA's jurisdiction.
It's interesting that a securities regulator would adopt blockchain technology, considering such agencies often lead in objecting to and regulating blockchains' native currencies, i.e., cryptocurrencies.
Israel has itself experienced its share of regulatory controversy over blockchain and crypto. The country began to examine token offering regulation in 2017, and in January 2018 proposed to remove cryptocurrency firms from Israel's national stock exchange. A change of heart, potentially attributable to a change in senior management, resulted in the creation of a sandbox for approving initial coin offerings (ICOs).
The ISA later formally defined ICO tokens (but not cryptocurrencies as a whole) as securities. Israel's tax authorities reconfirmed the classification of cryptocurrencies as property, for tax purposes, in February 2018.
However, since blockchains exist independently of the cryptocurrency markets themselves, the move is not surprising, considering the speed at which financial institutions are adopting blockchain technology.
Cryptocurrencies and blockchain technologies are growing in use and adoption in Israel, with rumors still circulating on the potential for the state to launch its own cryptocurrency, news which first came out in December 2017.