Blab Crypto
Israel Moves From Crypto Uncertainty to Regulatory Framework
In early August, Israel’s Capital Market Authority (CMA) released a draft circular that, for the first time, lists the digital assets licensed firms may offer for trading. The same week, the Bank of Israel updated its banking guidelines, removing a deposit‑delay rule that had previously limited the flow of funds from crypto transactions. Together, the two moves signal a shift from a cautious, fragmented approach to a principles‑based regulatory regime that aligns with global standards.
For years, Israel’s crypto sector operated on the margins of the financial system. Banks were reluctant to engage, and the legal status of digital assets remained unclear. The CMA’s new circular replaces ad‑hoc approvals with a set of clear rules. It allows licensed companies to trade the world’s 50 largest digital currencies, provided they meet a minimum market‑capitalisation threshold of $500 million, satisfy diversification limits, and are registered in recognised jurisdictions such as the European Union or New York State. The circular also incorporates the CMA’s earlier security standards for digital wallets, requiring full segregation of customer assets from operational capital and minimum financial reserves to cover operational and cyber‑security risks.
The Bank of Israel’s updated instructions address how banks handle funds generated by crypto activity. In mid‑July, the Banking Supervision Department removed an automatic delay on deposits exceeding NIS 100,000 that had previously slowed the movement of crypto‑derived funds. The new guidance gives banks the confidence to reassess their approach and to open the gates to assets that have undergone the CMA’s strict screening.
Stablecoins—cryptocurrencies pegged to a fiat currency—have become a focus of the regulatory push. The CMA published a legislative memorandum in late June that sets out a framework for stablecoin issuance, including the first Israeli shekel‑pegged stablecoin, BILS, approved after a two‑year pilot on the Solana blockchain. According to the Crypto Companies Forum, global stablecoin transaction volumes reached about $9 trillion last year, surpassing half of Visa’s annual settlement volume. The memorandum aligns Israel’s stablecoin rules with the EU’s MiCA framework and New York State’s regulations, providing a clear path for issuers and users.
Alongside private stablecoins, the Bank of Israel is testing a central‑bank digital currency (CBDC) known as the digital shekel. The pilot, which began in 2024, invites private sector participants to develop use cases for a state‑issued digital shekel that would function as a digital alternative to cash. The project remains in the testing phase, with a full rollout expected by the end of the year. The digital shekel is intended to increase competition in the payments market and reduce settlement costs, but it will coexist with private stablecoins and other cryptocurrencies.
Industry reaction has been largely positive. Nir Hirschmann, CEO of the Crypto Companies Forum, said the CMA’s circular “provides critical regulatory clarity… allowing licensed companies to expand their offerings to the 50 largest currencies in the world, compared with only eight or nine currencies offered so far.” Ilan Sterk, CEO of Horizon from Altshuler Shaham, noted that the new clarity gives banks the confidence to open the gates to assets that have undergone strict screening.
The regulatory framework is still evolving. The CMA’s circular is a draft; final approval will require consultation and possible amendments. The Bank of Israel’s digital shekel pilot will need to demonstrate technical and operational viability before a full launch. Meanwhile, the stablecoin memorandum will be refined as issuers and market participants provide feedback.
In sum, Israel is moving from a period of regulatory uncertainty to a structured, principles‑based approach that mirrors leading global markets. The CMA’s draft circular, the Bank of Israel’s updated banking guidelines, the stablecoin memorandum, and the digital shekel pilot together lay the groundwork for a more integrated and secure digital‑asset ecosystem. The next steps will involve finalizing the circular, completing the digital shekel pilot, and monitoring how the new rules affect market participation and consumer adoption.
For years, Israel’s crypto sector operated on the margins of the financial system. Banks were reluctant to engage, and the legal status of digital assets remained unclear. The CMA’s new circular replaces ad‑hoc approvals with a set of clear rules. It allows licensed companies to trade the world’s 50 largest digital currencies, provided they meet a minimum market‑capitalisation threshold of $500 million, satisfy diversification limits, and are registered in recognised jurisdictions such as the European Union or New York State. The circular also incorporates the CMA’s earlier security standards for digital wallets, requiring full segregation of customer assets from operational capital and minimum financial reserves to cover operational and cyber‑security risks.
The Bank of Israel’s updated instructions address how banks handle funds generated by crypto activity. In mid‑July, the Banking Supervision Department removed an automatic delay on deposits exceeding NIS 100,000 that had previously slowed the movement of crypto‑derived funds. The new guidance gives banks the confidence to reassess their approach and to open the gates to assets that have undergone the CMA’s strict screening.
Stablecoins—cryptocurrencies pegged to a fiat currency—have become a focus of the regulatory push. The CMA published a legislative memorandum in late June that sets out a framework for stablecoin issuance, including the first Israeli shekel‑pegged stablecoin, BILS, approved after a two‑year pilot on the Solana blockchain. According to the Crypto Companies Forum, global stablecoin transaction volumes reached about $9 trillion last year, surpassing half of Visa’s annual settlement volume. The memorandum aligns Israel’s stablecoin rules with the EU’s MiCA framework and New York State’s regulations, providing a clear path for issuers and users.
Alongside private stablecoins, the Bank of Israel is testing a central‑bank digital currency (CBDC) known as the digital shekel. The pilot, which began in 2024, invites private sector participants to develop use cases for a state‑issued digital shekel that would function as a digital alternative to cash. The project remains in the testing phase, with a full rollout expected by the end of the year. The digital shekel is intended to increase competition in the payments market and reduce settlement costs, but it will coexist with private stablecoins and other cryptocurrencies.
Industry reaction has been largely positive. Nir Hirschmann, CEO of the Crypto Companies Forum, said the CMA’s circular “provides critical regulatory clarity… allowing licensed companies to expand their offerings to the 50 largest currencies in the world, compared with only eight or nine currencies offered so far.” Ilan Sterk, CEO of Horizon from Altshuler Shaham, noted that the new clarity gives banks the confidence to open the gates to assets that have undergone strict screening.
The regulatory framework is still evolving. The CMA’s circular is a draft; final approval will require consultation and possible amendments. The Bank of Israel’s digital shekel pilot will need to demonstrate technical and operational viability before a full launch. Meanwhile, the stablecoin memorandum will be refined as issuers and market participants provide feedback.
In sum, Israel is moving from a period of regulatory uncertainty to a structured, principles‑based approach that mirrors leading global markets. The CMA’s draft circular, the Bank of Israel’s updated banking guidelines, the stablecoin memorandum, and the digital shekel pilot together lay the groundwork for a more integrated and secure digital‑asset ecosystem. The next steps will involve finalizing the circular, completing the digital shekel pilot, and monitoring how the new rules affect market participation and consumer adoption.
