Bitcoins. Photo: Wikimedia Commons.

JNS.org – As bitcoin and other digital currencies make historic gains, the “start-up nation” of Israel 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.

The Israeli Securities Authority (ISA) recently announced that it will establish a committee to review potential regulations for initial coin offerings (ICOs) — a new form of raising capital with digital currency, akin to a stock market’s initial public offering (IPO).

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.

Eyal Herzog — whose Bancor Foundation start-up is arguably one of Tel Aviv’s greatest local blockchain success stories, having 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.” Herzog also said that the country is “well-positioned to be a leader in the blockchain ecosystem.”

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 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 — launched a token distribution event on September 12.

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,” the company’s leader — Dany 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 that what “excites” him is the local development of cutting-edge digital currency technology that will be utilized 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 is already a global leader in cyber capabilities, and currently, Israeli innovators are “gradually migrating to blockchain technologies and building blockchain infrastructure,” said Fishel. Israel’s security expertise and wealth of entrepreneurial capability, he said, make the country an ideal “foundation for blockchain and cryptocurrency projects.”