As bitcoin and other digital currencies make historic gains, Israel, the start-up nation, is uniquely positioned to become a global leader in financial technology.
In August, digital currencies (also known as cryptocurrencies) exceeded a global market cap of $172 billion. (That means that the combined value of all publicly traded digital currencies surpassed that amount.)
The Israeli Securities Authority recently announced that it will establish a committee to review potential regulations for initial coin offerings. That is a new form of raising capital with digital currency, similar to a stock market’s initial public offering. Meanwhile, Alignment, Israel’s first blockchain incubator, was launched in late August.
Blockchain, a distributed database in which transactions made in digital currencies are recorded chronologically and publicly, is being used in a variety of global industries as a means of streamlining operations. Israel’s progress in the blockchain sector points toward the Jewish state’s growing influence in the world of financial technology.
The Alignment incubator strives to assist, develop, and fund “unique and high-quality projects” in Israel’s emerging digital currency ecosystem.
The incubator is the collaborative creation of Israeli cryptocurrency investment groups BlockchainIL, CoinTree Capital, and Singulariteam, and brings together some of the brightest minds in the budding industry on its advisory board, including Singulariteam founder and Chairman Moshe Hogeg, CoinTree CEO Uriel Peled, and Bancor project architect Eyal Herzog.
Because Alignment and its three founding companies all have operations in Israel, Hogeg vowed, “We’ll invest, without exception, in every Israeli blockchain company in 2017,” according to CoinReport.
“We believe blockchain will revolutionize every industry in the world,” he said, adding that the incubator’s projects “will benefit the world with unprecedented new products, services and business models.”
Herzog — whose Bancor Foundation start-up arguably is one of Tel Aviv’s greatest local blockchain success stories — it raised around $153 million on the Ethereum digital currency network in a June ICO — spoke highly of Israel’s potential in the sphere. “Israel is a leader in cyber and now blockchain technology with a long history of innovation in start-up R&D,” he said. And the country is “well-positioned to be a leader in the blockchain ecosystem,” he added.
Some local companies affiliated with Tel Aviv’s blockchain hub appear to be adapting to the potential for regulation in Israel’s cryptocurrency sphere, and they have taken the initiative to implement innovations to protect investors.
One such company, Kik — which enables people to communicate across the globe with its popular smartphone messaging application, and has product development offices in Tel Aviv — was slated to launch a token distribution event in September.
Before the event, the company allowed accredited investors, via Alignment, to participate in a pre-sale of “Kin” tokens and invest some $50 million in the project before the public ICO, which is capped at $125 million.
Kik, which according to the firm is the largest consumer company to enter the digital currency space, is taking “a different approach” with its token distribution event, Dany Fishel, president of Kik Israel, said.
Unlike other ICOs that have occurred up until now, Kik “obligates anyone who would like to invest, whether its in $5 worth of Kin tokens, or $1 million….to go through a Know Your Client registration process.”
The user must provide real identification credentials, such as a scan of a passport, other forms of photo identification, or a social security number in order to participate.
This, Fishel said, ensures a “fair” token distribution event, “allowing anyone who wants to participate to do so,” but also avoiding criminal activity, such as money laundering.
“We are taking a very strict approach here that we believe is the right one to take,” Fishel said.
Kik, unlike other companies that have launched ICOs, is already a well-established business with “a $1 billion valuation,” making it “the first ‘unicorn’ company to launch a token distribution event,” Fishel noted. A unicorn company refers to a start-up without a proven track record that is valued at more than $1 billion.
Regarding Tel Aviv’s role in the world of blockchain, Fishel said what “excites” him is the local development of cutting-edge digital currency technology that will be used around the world. “I’m honored that Tel Aviv will take ownership, accountability and responsibility for building the blockchain technology and infrastructure,” he said.
Israel already is a global leader in cyber capabilities, and now Israeli innovators are “gradually migrating to blockchain technologies and building blockchain infrastructure,” Fishel said. Israel’s security expertise and wealth of entrepreneurial capability make up an ideal “foundation for blockchain and cryptocurrency projects,” he added.