Israeli Regulator Designates Utility Tokens Issued by Companies as Securities

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The Israel Securities Authority (ISA) recently ruled that utility tokens issued by companies are securities and, therefore, cannot be classified as assets. The ISA’s decision comes after Israeli tech startup Kirobo sought to convince the regulator that its planned token issuance did not amount to a security offering.

Token Value Growth

However, in response to Kirobo’s claims, the ISA published a position paper explaining why the planned token offering should “be subject to Israeli securities regulations.” In brushing aside Kirobo’s averments, the ISA insists that the “tokens should be regarded as securities, whether due to the risk of holding them or the expectations of the buyers to receive a short or long-term return.”

The regulator also highlights an important aspect of Kirobo’s proposal, which appears to undercut the utility token claims. In the position paper, the ISA reveals that “Kirobo’s plans to keep hold of 0.8% of the tokens indicate that it is planning for the value of the tokens to increase.” The regulator adds:

There is a probability that there will be investors who will purchase the token for financial purposes and out of the expectation that the value will rise, which characterizes investments in securities.

Regulators Moving to Regulate…

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