The government of Israel and the national tax authority are apparently looking to tax the profits earned from Bitcoin trading. According to a source from the institution, the authorities are starting to see Bitcoin trading as a financial operation that can generate profits, so the transactions might be soon brought under taxation. For now, the statutory body is studying the cryptocurrency activity.
Bitcoin’s presence in the country is creating a lot of confusion among banks: the institutions claim they don’t know how to deal with the new currency. The doubts have reached the Bank of Israel, which is also analyzing the virtual currency scenario.
The problem is that, in the meantime, cryptocurrency is facing huge uncertainties in the country and that is affecting the local users, who have to deal with limitations on their digital transactions, as the local banks are limiting the value of international transfers that can be sent to Bitcoin exchanges. Users that tried to transfer money to Japan, where the exchange Mt. Gox is based, have reported limitation issues.
Bitcoiners and investors in the country have already asked the government to hurry the process and define the status of Bitcoin in the country, saying once and for all if cryptocurrency transactions are permitted or not.
The answer might take a while, since the model for taxing profits in this case has not been defined yet. First, Israel has to recognize virtual currency as something more than just an experiment.