Is crypto legal in Israel? Rules & regulation (2026)

Legal framework

Multi-agency regime — no single dedicated digital-assets statute. Key regulators: Capital Market, Insurance and Savings Authority (CMISA) under the Supervision of Financial Services (Regulated Financial Services) Law, 5776-2016; Israel Securities Authority (ISA) under the Securities Law, 5728-1968 (with proposed 2023–2026 amendments to bring 'digital assets' expressly in scope); Bank of Israel (stablecoins and digital shekel); Israel Tax Authority (Circular 5/2018 + draft 2024 Income Tax Ordinance amendment); AML/CFT supervision via the Prohibition on Money Laundering Order for financial-service providers.

Status by sub-area

• Stablecoins

  Partial

  There is no comprehensive stablecoin statute yet, but CMISA granted the first sandbox-based approval to a shekel-pegged stablecoin (BILS) in May 2026, and the Bank of Israel has publicly committed to a licensing regime with 1:1 reserve backing, liquidity requirements and reporting for issuers serving Israeli users.

  Still pending: Bank of Israel stablecoin licensing regime pending finalization

• Exchanges / VASP

  In force

  Crypto exchanges, brokers and wallet providers must hold a 'financial asset service' licence from CMISA under the 2016 Supervision of Financial Services (Regulated Financial Services) Law, plus register as financial-service providers under the Prohibition on Money Laundering Order.

• Token Offerings

  Partial

  Public offerings of tokens are governed by the existing Securities Law using a Howey-style analysis from ISA committee reports; security-token offerings need a prospectus/exemption, while utility/payment tokens fall outside securities regulation. A dedicated 'digital assets' amendment to the Securities Law has been proposed but not enacted.

  Still pending: Digital assets amendment to Securities Law proposed but not enacted

• Custody

  Partial

  Crypto custody for third parties requires a CMISA 'financial asset service' licence, and licensees must segregate client assets and maintain safeguarding policies. Institutional investors must use custody arrangements, but there is no statutory qualified-custodian regime specific to crypto, nor a general proof-of-reserves requirement.

• DeFi

  None

  There is no bespoke DeFi framework. Protocols and front-ends are analysed under existing securities, financial-services and AML rules; enforcement to date has focused on centralized VASPs and token issuers rather than DAOs or purely on-chain protocols.

• Tax

  Partial

  The Israel Tax Authority treats crypto as an asset (not currency) under Circular 5/2018: individual disposals attract 25% capital gains tax (30% for holders of ≥10%), corporates 23%, and trading-scale activity is taxed as business income. A November 2024 draft Income Tax Ordinance amendment codifying these rules and adding source rules for non-residents is still pending. A voluntary-disclosure procedure covering crypto runs 25 Aug 2025 to 31 Aug 2026.

  Still pending: Income Tax Ordinance amendment codifying crypto taxation pending enactment

Key points: crypto & digital assets in Israel

1. 01CMISA is the primary licensing authority

   Under the 2016 Supervision of Financial Services Law, providing services in a 'financial asset' — expressly including virtual currencies — requires a CMISA licence covering exchange, brokerage, custody and wallet activity. Only a handful of firms (Bits of Gold, Bit2C, Hybrid Bridge Holdings, Altshuler Shaham's Horizon) hold permanent licences.

   legal500.com globallegalinsights.com

2. 02ISA pursuing a securities-law overhaul for digital assets

   The ISA has proposed amendments to the Securities Law, Joint Investment Trust Law and Investment Advice Law that would define 'digital assets' and bring many tokens under its jurisdiction. A January 2026 ISA amendment aligning digital-investment-advice rules with modern platforms closed for public comment on 4 February 2026; the broader digital-assets bill remains unenacted.

   theblock.co barlaw.co.il

3. 03First regulated shekel stablecoin (BILS)

   In May 2026 CMISA granted full regulatory approval to BILS — a shekel-pegged stablecoin issued by Bits of Gold and operating on Solana — after a two-year sandbox pilot. Fireblocks provides custody. Separately, the Bank of Israel is preparing a stricter stablecoin licensing regime with 1:1 reserve backing and liquidity/reporting rules.

   finance.yahoo.com coindesk.com

4. 04Tax: 25% CGT; draft codification pending

   ITA Circular 5/2018 treats cryptoassets as 'assets' (not currency). Individual disposals are subject to 25% capital gains tax (30% for ≥10% holders), 23% for corporations, or ordinary business-income rates for trading activity. A November 2024 draft Income Tax Ordinance amendment would formally define 'digital assets' and codify these rules but is still in the legislative pipeline as of mid-2026.

   gov.il step.org

5. 05Token classification uses a Howey-style test

   The ISA's committee reports on ICOs (2018 interim; 2019 final) adopt the US Howey test to determine whether a token is a security subject to the Securities Law. Security tokens fall under ISA public-offering/prospectus rules; utility and payment tokens generally fall to CMISA's financial-services licensing regime.

   iosco.org iosco.org

6. 06No bespoke DeFi framework; digital shekel advancing

   DeFi has no dedicated regime; protocols are treated by analogy under existing securities, financial-services and AML rules. The Bank of Israel's digital-shekel team published a 2026 roadmap and Governor Amir Yaron has publicly labelled private stablecoins 'systemically relevant', signalling more formal oversight ahead.

   lightspark.com coindesk.com

Timeline of decisions

1. 3 Mar 2025Guidance · official
   Bank of Israel publishes preliminary design for the Digital Shekel

   The central bank released a detailed design document for a retail-and-wholesale CBDC and opened public consultation, the most concrete step yet toward a possible digital shekel; a launch decision is targeted for the end of 2026.

   Bank of Israel

2. 1 Aug 2024Guidance · official
   Bank of Israel launches the Digital Shekel Challenge

   The BOI ran a public innovation challenge with 14 firms (including PayPal, Fireblocks and Shva) to develop payment use cases for a future CBDC, concluding with a conference in late October 2024.

   Bank of Israel

3. 4 Jan 2023Guidance
   ISA proposes bringing digital assets under the Securities Law

   The Israel Securities Authority proposed amending securities legislation to define 'digital assets', subject token issuers to disclosure-document requirements and require intermediaries to be licensed, applying Howey-style tests to classify security vs. utility vs. payment tokens.

   CoinDesk

4. 28 Nov 2022Guidance
   Ministry of Finance proposes comprehensive digital-asset regulation roadmap

   A Finance Ministry report recommended a new licensing-and-supervision framework for issuers of backed digital assets and stablecoins, and proposed transferring oversight of assets with 'significant monetary effect' to the Bank of Israel.

   CoinDesk

5. 1 Sept 2022Decision
   Capital Market Authority grants Israel's first crypto service license

   Six years after the licensing regime was created, the CMA issued its first license to a virtual-currency service provider (Bits of Gold), formally bringing exchanges under supervised, regulated status.

   Legal 500

6. 1 Nov 2021Law · official
   AML order for virtual-currency service providers takes effect

   Israel implemented an anti-money-laundering order aligning crypto firms with FATF standards, imposing KYC, recordkeeping and reporting obligations administered with the Money Laundering and Terror Financing Prohibition Authority.

   Library of Congress

7. 3 Jun 2019Decision
   Supreme Court orders bank to keep crypto exchange's account open

   In Bits of Gold v. Bank Leumi, Israel's Supreme Court ruled the bank could not categorically refuse service to a licensed crypto exchange, a landmark win that secured banking access for the industry (subject to case-by-case scrutiny).

   CoinDesk

8. 1 May 2019Decision
   District court confirms Bitcoin is an asset, not currency, for tax

   In the Copel case the Central District Court held that Bitcoin is not a 'currency' and gains are taxable as capital gains, judicially endorsing the Tax Authority's position and rejecting a foreign-currency exemption claim.

   Cointelegraph

9. 19 Feb 2018Guidance · official
   Tax Authority Circular 5/2018: crypto taxed as an asset

   The Israel Tax Authority finalized its position that virtual currencies are 'assets' (not currency), so individual sales are subject to ~25% capital gains tax and business activity to ordinary rates, still the core of Israel's crypto tax treatment.

   Israel Tax Authority (gov.il)

10. 19 Feb 2014Guidance
    Regulators issue joint public warning on virtual currencies

    The Bank of Israel, CMA, Tax Authority, Securities Authority and anti-money-laundering authority jointly warned the public about fraud, volatility and money-laundering risks and stressed crypto is not legal tender, the first official stance, leaving crypto legal but unregulated.

    The Times of Israel

Sources

1. 1.gov.il/en/pages/faq-digital-assets
2. 2.legal500.com/guides/chapter/israel-blockchain-crypto-assets/
3. 3.globallegalinsights.com/practice-areas/blockchain-cryptocurrency-laws-and-regulations/israel/
4. 4.theblock.co/post/199076/israels-financial-regulator-proposes-crypto-inclusion-to-
5. 5.coindesk.com/business/2025/12/01/israel-s-central-bank-signals-improved-stablecoin
6. 6.finance.yahoo.com/markets/crypto/articles/israeli-regulators-approve-shekel-stablecoin-
7. 7.step.org/industry-news/israel-proposes-new-digital-assets-tax-regime
8. 8.iosco.org/library/ico-statements/Israel%20-%20ISA%20-%2020190301%20-%20Regulati
9. 9.gov.il/BlobFolder/news/press_28112022/en/PressReleases_eng_Files_eng_Digital
10. 10.barlaw.co.il/crypto-custody-services-and-regulation-a-review/
11. 11.barlaw.co.il/practice_areas/regulation/client_updates/israel-securities-authority-
12. 12.iosco.org/library/ico-statements/Israel%20-%20ISA%20-%20Interim%20Report%20on%2
13. 13.lightspark.com/knowledge/is-crypto-legal-in-israel