Earlier this week, the Capital Market Authority distributed a draft circular to the crypto industry. If this sentence sounds familiar, it is because it marks the third time in the past two months that the Authority has published new guidelines for the sector. At the same time, the Bank of Israel has also issued updated instructions for banks, creating what appears to be an unprecedented regulatory push for the Israeli crypto market.
Cryptocurrency is a digital asset based on blockchain technology. It operates without central intermediaries and, in most cases, is characterized by significant price volatility. For years, Israel’s crypto industry was viewed as a kind of “backyard” of the financial system: an advanced technology sector operating under persistent legal uncertainty, with banks reluctant to engage and unclear boundaries between legitimate innovation and financial risk.
The latest series of regulatory moves marks a shift from containment and caution toward a principles-based regulatory approach that has been adopted by leading markets worldwide.
The draft circular published yesterday defines which digital assets Israeli crypto companies will be allowed to offer for trading. A week earlier, the Authority introduced mandatory security standards for managing digital wallets, alongside capital requirements for companies operating in the sector. In mid-July, the Banking Supervision Department removed a major barrier by canceling the automatic delay imposed on deposits originating from crypto transactions exceeding NIS 100,000. At the center of this regulatory wave is also a first-of-its-kind legislative memorandum aimed at regulating the issuance of stablecoins pegged to the shekel and the dollar.
The latest circular establishes, for the first time, a regulated mechanism allowing licensed companies to offer trading in the world’s 50 leading digital currencies, subject to strict screening criteria. These include a minimum market capitalization threshold of $500 million, diversification requirements limiting concentration among holders, and reliance on registration in recognized jurisdictions such as the European Union and New York State.
“Our main goal is to create a transparent and balanced framework that, on the one hand, protects the public and prevents the entry of high-risk assets, and on the other hand allows the Israeli market to develop and grow alongside global trends,” explains Eli Tobul, Senior Deputy Commissioner of the Capital Market Authority. “We are moving from individual processes of approving each asset to broad and clear rules. This clarity is necessary to give supervised entities the confidence to operate and develop new products.”
The latest move complements two circulars published by the Authority several weeks earlier. Through new rules governing custody and capital requirements, the regulator established stricter security standards for managing digital wallets, including a requirement to fully separate customer assets from a company’s operational capital, alongside minimum financial reserves designed to absorb operational and cybersecurity risks.
The local industry has welcomed the developments. Nir Hirschmann, CEO of the Crypto Companies Forum in Israel, said: “The Capital Market Authority’s series of circulars provides critical regulatory clarity, what is permitted and what is prohibited. In practice, the new rules formalize work practices that many leading companies have already implemented. This clarity provides freedom of action, increases competition, and allows licensed companies to expand their offerings to the 50 largest currencies in the world, compared with only eight or nine currencies offered so far.”
The complementary pillar of the reform is an update to the Bank of Israel’s guideline, which regulates how funds originating from crypto activity are handled by the banking system.
“The historical policy of some banks in Israel, which limited trading to individual currencies such as Bitcoin and Ethereum, was unique in the world,” explains Ilan Sterk, CEO of Horizon from Altshuler Shaham. “The regulatory clarity now provided by the Capital Market Authority gives the banking system the confidence needed to reassess its approach and open the gates to assets that have undergone strict screening.”
Sterk added that the Israeli regulator is aligning itself with international frameworks, including New York State regulation (NYDFS) and Europe’s MiCA framework, while adapting quantitative criteria to the local market.
Alongside regulation of crypto trading, the Capital Market Authority is simultaneously advancing regulation for another major digital asset: stablecoins.
A stablecoin is a cryptocurrency designed to maintain a fixed value, usually pegged 1:1 to a traditional currency such as the dollar or shekel. Unlike volatile cryptocurrencies, stablecoins are primarily intended as infrastructure for payments, cross-border transfers, and rapid settlement rather than speculative investment.
Global activity highlights the growing importance of the sector. According to data published by the Crypto Companies Forum, annual stablecoin transaction volumes worldwide reached approximately $9 trillion, more than half of Visa’s annual settlement volume.
At the end of June, the Authority published a legislative memorandum addressing stablecoin regulation.
“Stablecoins are the first killer application of the crypto world,” says Hirschmann. “Even during periods of volatility in asset prices, we are seeing an explosion in this segment. For the first time, we have a tool that enables cross-border payments and presents a real economic use case. Trading volumes show that this technology has moved from theory into global financial infrastructure.”
Sterk emphasizes the infrastructure implications: “Stablecoins are creating real disruption in the world of cross-border payments. Instead of bank transfers that take days and involve high fees, stablecoins make it possible to transfer value anywhere in the world within seconds and at minimal cost.”
Alongside cryptocurrencies and stablecoins, a third pillar is emerging: the digital shekel.
The digital shekel is a central bank digital currency (CBDC), an official digital version of Israel’s currency issued and backed directly by the Bank of Israel. Unlike private stablecoins, it would represent a direct obligation of the state, similar to physical cash but in digital form.
Its purpose is not speculative trading, but rather creating a digital alternative to cash, increasing competition in the payments market, and reducing settlement costs.
The Bank of Israel’s digital shekel project remains in the testing and evaluation phase, with an update on the pilot and the readiness of the banking system expected by the end of the year.
The digital shekel, stablecoins, and other cryptocurrencies are therefore expected to coexist as part of a broader digital financial ecosystem that could eventually reduce costs for households and businesses while improving payment speed and security.
“The burning question now is when all of this will translate into everyday use,” explains Tobul. “The assessment is that adoption by consumers will be gradual and linear and will not happen as a ‘big bang.’ Unlike areas such as artificial intelligence, where there is discussion about a singularity point that transforms the market overnight, digital finance is advancing through a gradual and structural process.”
“The goal is to reach a state where these services are integrated transparently and smoothly into the daily lives of the public,” he added.