Blockchain Trade Mission to Israel
Blockchain Trade Mission to Israel
The Chamber of Digital Commerce and the U.S. Department of Commerce Commercial Service led a Blockchain Certified Trade Mission to Israel on April 1-3, 2019. The purpose of the mission was to promote greater collaboration and business activity between the US and Israel blockchain communities. Israel has the highest concentration of tech companies outside of Silicon Valley and its tech industry accounts for 15.7 percent of its GDP. The trip included Chamber members that have an interest in the Israeli tech community. We met with and heard from the key regulators about their activity in the blockchain space and connected with the leading Israeli blockchain startups.
Key Takeaways from the Trade Mission:
- The Israeli Government Has a Coordinated Blockchain Strategy
The Bank of Israel hosted the Trade Mission for a series of meetings with government offices, including the Israel Security Authority, Capital Markets Authority, Israel Money Laundering and Terror Financing Authority, Innovation Authority, Ministry of Finance, Israel Tax Authority and the National Cyber Directorate. Each provided a succinct overview of their learnings and activities regarding blockchain technology, as well as friction points they are working to address. There are a number of notable activities underway that demonstrate an advanced regulatory perspective from Israel.
The most important of these is the Bank of Israel’s inter-ministerial committee, which was formed in January 2018 for regulatory coordination of virtual assets. The committee is comprised of all financial services regulators. Their core activities include: 1. monitoring market developments in Israel and abroad; 2. examining the issues concerning the application of regulation to the various uses of the technology and their implication for economic activity, the financial markets and financial stability; and 3. gathering data and information for the purpose of creating a knowledge base on the issue for regulatory authorities and the public in order to formulate recommendations regarding the desired regulatory policy.
The committee recommended developing a sandbox to help companies bring their products to the financial services industry while addressing risk. It is their view innovation may serve as a protection measure to investors by increasing the quality of the market. The committee also stated that having a coordinated effort allows the regulators the opportunity to more fully assess risks of the technology.
- World’s Leading Cybersecurity Provider Sees Promise in Blockchain
Israel is a world leader in cybersecurity. In 2018, Israeli startups received nearly 20 percent of all venture capital invested in cybersecurity. The Israeli government has a number of programs to support the private sector development and innovation. And the Israeli military has developed some of the most advanced cybersecurity units in the world.
The Israel Innovation Authority (IIA), a government authority, works to stimulate the Israel industry by providing funding and grants. They estimate that there are 100-150 blockchain companies in Israel and about one-third of them have been vetted by the IIA for funding. About 10-15 blockchain companies have received funding from the IIA thus far.
The National Cyber Directorate (NCD) also sees promise in blockchain. Our group received an impressive presentation from the NCD on potential public sector blockchain use cases for the State of Israel. The NCD is interested in using blockchain as the backbone of a national time synchronization network (time-as -a-service), which is on schedule to go into production this year. Other potential blockchain applications they are looking at include a national mobile-ID and digital identity, electronic health records, and smart cities applications.
One of the most encouraging perspectives came from the Israel Security Authority (ISA). In October 2018, the ISA implemented a blockchain application and is using the technology to deliver communications to institutions it regulates. “Implementing blockchain technology in the ISA’s information systems makes it one of the global leading authorities in securing the information provided to the public and its credibility as one of the leaders in Israel’s public sector,” said Natan Hershkovitz, director of the ISA’s Information Systems Department. Representatives from ISA conveyed that they were interested in using the technology to better understand it. The ISA has issued numerous sets of guidance around digital assets and demonstrated a strong understanding of the friction points traditional securities law pose for blockchain technology.
- Israel’s Blockchain Community is Thriving
Throughout the week we had the opportunity to meet with many of Israel’s leading blockchain companies. Some of the most prestigious startups and academics are working on privacy-related projects and protocols (Enigma, Starkware, Hebrew University). And many companies catering towards the enterprise sector (Multichain, QEDit, supply chain, financial services). In addition, public-private networks are developing to allow people to transact in trustless environments.
For example, Orbs is a public blockchain infrastructure for mainstream businesses, crowned a Gartner ‘Cool Vendor’ in blockchain for 2018. Built to unlock the potential of blockchain as the next evolution of open-source, Orbs provides a platform where companies can give users and partners strong guarantees of auditability, governance and forkability that will make them more competitive and attractive to their ecosystem. To accommodate business needs, Orbs is pioneering a hybrid consensus architecture, keeping businesses in control of costs, governance and guaranteed performance, while still capturing the disruption of a truly decentralized Proof-of-Stake ecosystem with a permissionless validator pool.
One of the highlights of our trip was a site visit to Bancor, a decentralized liquidity network for tokens. Bringing the philosophy of Bernard Lietaer to life, Bancor’s vision is to support the development of “community currencies” or monetary systems that are developed for local communities that share a common set of values and interests. Since October 2017, Bancor Network has processed over $1.5 billion in coversions between over 9700 unique token pairs, due to its hub and spoke network architecture, utilizing the Bancor Protocol.
We also learned that Israel’s blockchain community is filled with former military coders. Many start-ups have former government agency heads of security as their CSOs. Since many citizens are required to serve (women two years, men three years and eight months), the military is part of an Israeli’s DNA and culture.
Many developed nations have taken proactive steps to create an inviting environment for businesses to innovate with blockchain technology within their jurisdictions. Will the Israeli tech scene flourish with blockchain at the helm? Israel has a unique set of resources that sets them apart from high skilled technology talent, to cutting edge cybersecurity capabilities, and robust government programs to support innovation. Israel is well positioned to be a leader in the development of blockchain technology and we are pleased to support global collaboration with the Israeli blockchain community.
We would like to thank the U.S. Department of Commerce Commercial Service for their support in leading the trade mission. We would also like to thank Ambassador David Friedman for hosting our delegation in Israel. Thank you Galia Benartzi, Emmanuel Benhamou, Shauli Renjwan, Yotam Avichay and all our Israeli friends who provided recommendations and introductions in making this a successful trip.
Caroline Abenante, Founder, President and Vice Chairperson, NYIAX – “The Trade Mission was extremely valuable to NYIAX and all technology companies who use or are seeking to implement blockchain. We discovered new potential partners and technology providers who can enhance our offering. Additionally, the ability to spend quality time with corporations large and small who use crypto and blockchain allowed us to have a better perspective of our offering. The trade mission was extremely valuable in understanding where we and others fit. I am personally very happy with its content, preparation and outcome.”
Jeff Brown, Chief Technology Analyst, Bonner & Partners – “The Chamber’s Trade Mission to Israel was a fantastic way to engage one of the most important technology markets in the world. It’s rare to get such well-balanced exposure to policy makers, diplomats, established projects, early-stage ventures, and prominent business leaders all within the span of one trip. The levels of engagement were high, we received great support from the U.S. Department of Commerce, and we left with new insights and an invaluable network in the Israeli blockchain community.”
Rune Christensen, Founder, MakerDAO – “It was inspiring to visit Israel and to experience first hand the pervasive startup culture, risk tolerance, and forward momentum of its blockchain community. We met and engaged with several potential partners during the trip and are leaving feeling very optimistic about the future of the industry.”
Eric Sibbitt, Partner, O’Melveny – “The trade mission was helpful in understanding the breadth and depth of the blockchain ecosystem in Israel. I was particularly impressed by the caliber of human talent and entrepreneurial spirit in Israel, which has helped empower Israel to have a disproportionate impact on global blockchain activity.”
Colleen Sullivan, CEO & Co-Founder, CMT Digital – “CMT Digital has participated in the Chamber’s and U.S. Department of Commerce’s trade missions to the UAE, Singapore and Israel. With each of these trade missions, we have been very impressed with the quality and substance of the meetings. These trips have been meaningful for CMT Digital from both a trading and venture investment standpoint. The crypto and blockchain space is truly global and through these trade missions, we have been able to expand our footprint and become aware of opportunities in regions that we may not have otherwise explored.”