Crypto Overview in Israel

Regulatory data is for informational purposes only and may not reflect the most current legal developments. Always consult qualified professionals before making decisions.

Legal Classification and Regulatory Framework

Cryptocurrency Status

Cryptocurrency is legal in Israel but is not recognized as legal tender or currency. The Supervision of Financial Services (Regulated Financial Services) Law, 5776-2016, classifies virtual currencies as “financial assets,” placing them under the oversight of regulated financial services. This classification opened the door for multiple regulators to issue orders and guidance across the crypto sector.

The ITA reinforced this through Circular 5/2018, which formally designated virtual currencies as “assets” under Section 88 of the Income Tax Ordinance. Circular 7/2018 addressed utility token taxation in initial coin offerings; Circular 91/2021 confirmed that Bitcoin value changes do not qualify as exempt exchange-rate differences.

The ISA has established a three-tier token classification framework: currency tokens used as payment instruments, security tokens conferring ownership or membership rights, and utility tokens granting access to a specific service or product. Tests analogous to the US Howey Test determine whether a given token falls under securities law or the broader financial services regime.

Tax Treatment

All realized gains from the sale, exchange, or disposal of cryptocurrency are taxable events. Individual investors pay 25% CGT, rising to 30% where the seller held 10% or more of the issuing entity in the preceding 12 months. Corporate entities pay 23% CGT. Where trading is classified as a business operation, income tax rates between 10% and 50% apply.

Mining is treated distinctly: individuals who mine are classified as “dealers” for value-added tax purposes, while business-level mining operations may face an additional 17% profit tax applicable to financial institutions. Crypto-to-crypto swaps constitute taxable events under a December 2021 ITA reporting position.

In November 2024, the Ministry of Finance and the ITA published draft legislation to formally define “digital assets” in the Income Tax Ordinance. The bill codifies the 25% CGT rate, introduces source rules tied to the seller’s Israeli tax residency at the date of acquisition, and addresses gains on assets representing rights in Israeli entities. It remains in legislative progress as of mid-2026.

Regulatory Oversight

Five primary bodies share oversight responsibilities:

The Capital Market, Insurance and Savings Authority (CMISA) is the primary licensing authority for exchanges, brokers, custodians, and wallet providers operating under the 2016 law. CMISA also issued a directive in February 2025 requiring payment companies to implement AML obligations using online identification technology.

The Israel Securities Authority (ISA) supervises public token offerings, determines security-token status, and regulates licensed investment advisors and portfolio managers who handle digital assets. In January 2026 the ISA published a proposed amendment to align its directive on digital investment advice with current technological platforms; public comments closed February 4, 2026.

The Bank of Israel (BoI) issues directives to financial institutions on crypto-related risk management, leads research on the Digital Shekel central bank digital currency (CBDC), and has published principles for stablecoin oversight. Banking Management Directive 411 prohibits banks from automatically refusing crypto-related accounts and requires risk-based assessment; transactions above NIS 100,000 require source-of-funds investigation.

The Israel Money Laundering and Terror Financing Prohibition Authority (IMPA) is Israel’s financial intelligence unit, established under the Prohibition of Money Laundering Law, 5760-2000. IMPA supervises AML and counter-terrorist financing compliance across all VASPs and is consistently ranked among the world’s top FIUs following Israel’s FATF accession in 2018.

The Israel Tax Authority (ITA) issues classification circulars, reporting requirements for all crypto transactions including crypto-to-crypto swaps, and manages tax enforcement across the sector.

Business Environment

Banking Relationships

Banking access has historically been the most significant operational challenge for crypto businesses in Israel. Traditional banks maintained conservative policies resulting in account refusals or asset freezes for customers with cryptocurrency-related funds.

Bank of Israel Banking Management Directive 411 prohibits automatic refusal and requires risk-based policies considering the cryptocurrency involved, its anonymity level, the identity and licensing status of the service provider, and the customer’s transaction profile. Transactions above NIS 100,000 require source-of-funds investigation.

Despite these rules, practical implementation remains uneven. Most Israeli banks limit crypto-related services to a narrow set of assets (primarily Bitcoin, Ethereum, and USDC) and only accept funds from well-known international platforms or CMISA-licensed domestic firms. The Israeli Supreme Court has confirmed that banks are not prohibited from servicing crypto clients, reinforcing Directive 411’s intent. Ongoing dialogue between the BoI, licensed crypto firms, and commercial banks continues to work toward reducing unnecessary barriers.

Innovation Support

Israel’s “Start-Up Nation” ecosystem extends directly into blockchain. The ISA and Israel Innovation Authority have jointly tested regulatory relief programs for blockchain projects, regulatory technology, and tokenized assets. A Data Sandbox program operated with the Tel Aviv Stock Exchange supports companies addressing industry needs. The Bank of Israel launched the Digital Shekel Challenge, inviting private-sector participants to build innovative payment solutions on an experimental CBDC environment. The BILS stablecoin, a NIS-pegged token on Solana, operates under CMISA sandbox supervision.

In August 2024, the ISA approved an amendment allowing non-bank members of the Tel Aviv Stock Exchange (TASE), such as brokerage and investment firms, to offer Bitcoin and Ethereum trading and custody services through a “closed garden” framework. A Non-Bank Broker-Dealer Bill submitted to the Knesset in July 2025 would shift oversight of non-bank brokers from TASE to the ISA and align licensing with principles drawn from the EU Markets in Financial Instruments Directive (MiFID II).

The Mamram Blockchain Incubator, backed by alumni of the Israel Defense Forces’ central computing unit (Mamram), partners with StarkWare, Fireblocks, and Collider VC to support early-stage ventures. Pre-seed and seed funding in Israeli blockchain and crypto ventures reached $607 million in H1 2025, a 50% increase over the prior year.

Crypto License in Israel

Operating a cryptocurrency exchange, brokerage, custody service, or wallet provider in Israel requires a licence from the Capital Market, Insurance and Savings Authority (CMISA) under the Supervision of Financial Services (Regulated Financial Services) Law, 5776-2016. The licensing framework has been in place since 2016, though the rigorous application process has meant that relatively few licences have been granted; the first was issued in late 2022.

Licensing Requirements

Applicants must submit documentation covering their corporate structure, business plan, proof of adequate capital, IT and cybersecurity policies, details of directors and key personnel, and a compliance handbook. CMISA reviews the fitness and suitability of all controllers and senior officers. Applicants must demonstrate AML and Know Your Customer (KYC) frameworks aligned with IMPA directives, cybersecurity readiness, and financial stability. Companies with applications pending may continue operations under a temporary permit during review. Licensed entities are subject to ongoing supervision, periodic inspections, and reporting obligations.

Authorized Activities

A CMISA licence covers services classified as “regulated financial services” involving virtual currencies: exchange and brokerage (buying and selling digital assets on behalf of clients), custody and wallet services, and related financial intermediation. The ISA’s “closed garden” amendment additionally allows TASE non-bank members (investment firms, brokerage houses) holding the relevant ISA licence to offer Bitcoin and Ethereum trading and custody to retail and institutional clients through TASE infrastructure.

Token issuances that meet the ISA’s security-token criteria must comply with the Israeli Securities Law, which requires a prospectus or an applicable exemption. Utility tokens and currency tokens fall under CMISA’s scope rather than the ISA’s unless they cross the investment-contract threshold.

Application Process and Timeline

Applicants submit a full licence application to CMISA including all required documentation, officer declarations, capital proof, and compliance frameworks. CMISA undertakes a fit-and-proper assessment of controllers and key officers and may request additional information or undertakings before making a decision. Given the small number of licences issued since the framework’s inception, applicants should expect extended review timelines, potentially 12 to 24 months. Engaging local legal counsel experienced in CMISA financial services licensing is strongly recommended given the documentation intensity and the limited published precedent.

Foreign firms serving Israeli customers should assess whether their activities trigger a CMISA licensing obligation, as the law applies to services provided to Israeli residents regardless of incorporation jurisdiction.

Market Characteristics

Adoption Patterns

Israeli consumers show strong interest in cryptocurrency as an investment asset. Many users have historically relied on international trading platforms given the limited availability of CMISA-licensed domestic services. The ISA’s 2024 TASE amendment is opening channels for institutional-grade access through established investment firms, which may shift some activity toward domestic infrastructure over time.

Institutional adoption has been constrained by regulatory uncertainty and banking sector conservatism; as CMISA-licensed entities increase in number and banking directives are more consistently enforced, broader institutional participation is expected. The Israeli Crypto, Blockchain and Web 3.0 Companies Forum, whose founding members include Fireblocks, StarkWare, and Bits of Gold, participates actively in regulatory consultations and advocates for frameworks that balance consumer protection with innovation.

Industry Focus

Israel’s blockchain sector is concentrated in areas that leverage national strengths in cryptography, cybersecurity, and software engineering. StarkWare Industries, valued at $8 billion in 2025, developed the STARK zero-knowledge proof protocol, underpinning scalability and privacy improvements across multiple public blockchains. Fireblocks, co-founded by Israelis and now headquartered in New York, provides institutional-grade digital asset custody and transfer infrastructure. Bits of Gold, one of Israel’s oldest domestic exchanges, holds a CMISA licence. eToro, the Israeli-founded retail investing platform, has expanded its cryptocurrency offerings globally. Israeli companies also lead in blockchain security, fraud prevention, and compliance tooling.

Approximately 3,300 Israelis were employed in blockchain-related roles as of 2024.

Regulatory Evolution

Israel’s regulatory framework continues to mature through incremental adaptation of existing financial services law. The November 2024 draft Income Tax Ordinance amendment codifies digital asset tax treatment; the July 2025 Non-Bank Broker-Dealer Bill extends ISA supervision over investment firms handling crypto; and an ISA amendment in January 2026 brings platform-based investment advisory services into clearer regulatory scope.

The Bank of Israel’s Digital Shekel project is the most significant structural development. The preliminary design published in March 2025 describes a two-tier retail and wholesale CBDC with 1:1 shekel parity, higher privacy than existing digital payments, offline capability, and no programmability of the monetary unit. A technological assessment consultation launched in August 2025 feeds into a potential launch decision the BoI aims to place before the Governor by end of 2026.

Israel is not subject to MiCA; Israeli companies serving European customers must comply with EU requirements independently. Regulators maintain active FATF engagement and incorporate global standards into domestic policy on AML, the Travel Rule, and stablecoin oversight.