- The move aims to spur digital payment methods within the country
- Authorities can easily track tax evasion, black market activity and money
- The new limits placed on cash seem to evoke a positive reaction in the crypto world
Authorities in Israel introduced limits on cash payments as a means to battle illegal activity and at the same time to spur digital payment methods within the country.
The restrictions are to start being effective from the 1st of August 2022 restrict cash payments narrowed to $1,760 or 6000 Israeli shekels. This is on business transactions only. Limits targeting personal transactions are tightened to $4,400 or 15000 shekels.
Since January 2019, Israeli businesses and consumers have experienced limits on cash payments while trading.
Why the cash limits?
The limits on cash payments fall under the law for the Reduction in the use of Cash that aims at shifting the country’s citizens and businesses toward digital payments.
The new restrictions allow authorities to keep track of tax evasion, black market activity and money laundering more easily
The country should expect further restrictions to follow shortly. The restrictions seek to ban the accumulation of more than $58,660 or 200,000 shekels, which happens in private residences in the form of cash reserves.
Digital payments to promote crypto
Tamar Bracha, from the Israel Tax Authority (ITA), claims that limiting the use of cash reduces criminal activities. He stated that the authority sets to reduce cash fluidity in the market. Tamar cited that crime organizations tend to rely mainly on cash.
Meanwhile, the new limits on cash seem to encourage a positive reaction in the crypto world. Crypto enthusiasts believe that the move sets the pace for crypto adoption in the country in the future.
Lark Davis on Twitter told his 1 million followers that Israel remains an entity among other countries that imposed the restrictions. He, on Saturday, 30 July 2022, stated that Israel would ban cash payments over $4,400.
That means that users cannot pay for a used car, designer bag, or any other high-ticket item using cash.
According to strategic investor Lyn Alden, founder of Lyn Alden Investment Strategy, the trend will continue. Alden claims that the trend will be embraced in other countries over time.
Israel’s plan on CBDCs
Israel, among other countries, continues to explore the CBDC space. The country first considered the initiative of creating Central Bank Digital Currencies in 2017.
In May, the Bank of Israel revealed the responses to a public consultation around its plans. The Bank previously laid plans for a digital shekel. The study indicated the presence of strong support for continued research on CBDCs.
The consultative process also relayed the impact on the payment markets. Other sectors influenced include monetary stability and legal and technological fields.
In June 2022, the Bank of Israel revealed its conclusions from a lab experiment conducted by the Bank. The lab experiment aimed at examining user privacy. Consequently, the experiment touched on smart contract usage in payment systems.
This made the lab experiment the first technological experiment with a CBDC. Israel nevertheless continues to set up a regulatory framework around digital assets.
Jonathan Shek of Oz Finance, in May 2022, revealed details of the regulatory framework. During the Crypto conference, Jonathan claimed that the financial authorities sought to prepare the framework.
The comprehensive and holistic framework mainly touched on digital assets in the country. Although he did not give an exact date, Shek teased that it would come in the near future.
He added that the Israeli government remained committed to fostering the growth of the crypto industry. If done in a responsible manner, the initiative will foster a crypto adoption wave in the country.
