Israel
Retail_Trading_Status
- Analysis ID
- #695
- Version
- Latest
- Created
- 2025-12-12 04:40
- Run
- 92243f09...
- History
- View all versions
- Workflow Stage
- Step 1
Executive Summary
Cryptocurrency retail trading is legal and fully regulated in Israel under the supervision of the Capital Market, Insurance and Savings Authority (CMISA). Service providers must obtain a 'Financial Asset Service Provider' license to operate, with several permanent licenses already issued to major local entities like Bits of Gold and Hybrid Bridge Holdings. The regulatory framework is robust, featuring strict AML/KYC obligations, a clear tax regime treating crypto as a financial asset subject to capital gains tax, and banking directives that prohibit banks from categorically refusing funds from licensed crypto businesses.
Key Pillars
Primary Regulator: Capital Market, Insurance and Savings Authority (CMISA) oversees licensing and supervision of Virtual Asset Service Providers (VASPs).
Licensing Regime: Entities must hold a license for 'providing services in a financial asset' under the Supervision of Financial Services Law.
Banking Access: Bank of Israel Directive 411 prohibits banks from sweeping refusals of crypto-sourced funds, mandating a risk-based approach for licensed entities.
AML/CTF Compliance: The Prohibition on Money Laundering Order imposes strict identification, reporting, and record-keeping obligations on crypto service providers.
Taxation: The Israel Tax Authority (ITA) classifies cryptocurrency as a financial asset, subjecting individuals to a 25% capital gains tax.
Landmark Laws
Supervision of Financial Services (Regulated Financial Services) Law, 5776-2016 (Law 5776-2016) - Enacted: 2016-01-01
- The foundational law establishing the licensing requirement for 'services in a financial asset,' which includes virtual currencies. It empowers the CMISA to supervise and sanction non-compliant entities.
- Source
Prohibition on Money Laundering Order (Obligations of Identification, Reporting and Record-Keeping of Financial Asset Service Providers) (Order 5778-2018) - Enacted: 2018-01-01
- Applies Israel's AML/CTF framework to crypto service providers, requiring them to perform KYC, monitor transactions, and report suspicious activities to the Israel Money Laundering and Terror Financing Prohibition Authority (IMPA).
Proper Conduct of Banking Business Directive 411 (Amendment) (Directive 411) - Enacted: 2022-11-09
- A directive from the Supervisor of Banks mandating that banks cannot refuse to provide payment services or accept funds solely because they originate from cryptocurrency activity, provided the source is a licensed entity.
- Source
Income Tax Ordinance Amendment (Digital Assets) (Draft Memorandum 2024) - Enacted: 2024-11-01
- A proposed memorandum to explicitly codify the definition of 'digital assets' in the tax code and clarify source rules for capital gains, reinforcing the existing 25% tax policy.
- Source
Considerations
Taxation: Crypto is treated as an asset (property), not currency. Sale or exchange triggers a capital gains tax event (25% for individuals).
Banking Friction: While Directive 411 exists, practical friction remains. Banks still apply rigorous risk assessments, and transfers from unlicensed or foreign exchanges may face rejection.
Securities Classification: The Israel Securities Authority (ISA) may classify certain tokens as securities. In August 2024, the ISA approved amendments allowing non-bank TASE members to offer crypto trading.
Enforcement: The CMISA actively enforces regulations, evidenced by the blocking and fining of the 'Bitin' exchange in 2024/2025 for operating without a license.
Notes
Israel is often referred to as the 'Startup Nation' and has a very high rate of crypto adoption and tech development. The regulatory approach reflects this by trying to balance innovation with strict security and AML concerns, largely driven by the country's unique geopolitical security situation.
Remaining Uncertainties
- The exact timeline for the full implementation of the 'Digital Shekel' (CBDC) and how it might impact private stablecoin regulation.
- The practical success rate of retail clients transferring large sums from *foreign* exchanges (like Binance) back to Israeli banks, despite the directive favoring local licensed entities.
Detailed Explanation
Detailed Explanation
Cryptocurrency retail trading is legal and fully regulated in Israel. The regulatory framework is anchored by the Supervision of Financial Services (Regulated Financial Services) Law, 5776-2016, which mandates that any entity providing services in a financial asset, a category that explicitly includes virtual currencies, must obtain a license from the primary regulator, the Capital Market, Insurance and Savings Authority (CMISA). Several permanent licenses have already been issued to major local service providers like Bits of Gold and Hybrid Bridge Holdings, demonstrating an active and operational licensing regime. The CMISA actively enforces this requirement, as seen in its 2024/2025 action to block and fine the 'Bitin' exchange for operating without a license. Compliance for licensed entities is stringent, particularly under the Prohibition on Money Laundering Order (Obligations of Identification, Reporting and Record-Keeping of Financial Asset Service Providers) from 2018, which imposes rigorous AML/CTF obligations including KYC, transaction monitoring, and reporting to the Israel Money Laundering and Terror Financing Prohibition Authority (IMPA). The regulatory environment is designed to balance Israel's status as a high-adoption 'Startup Nation' with strict security concerns, a priority influenced by the country's unique geopolitical situation. A significant pillar of this framework is the Proper Conduct of Banking Business Directive 411, enacted on 2022-11-09, which prohibits banks from categorically refusing to service or accept funds solely because they originate from cryptocurrency activity, provided the source is a licensed entity. However, practical banking friction persists as institutions apply rigorous risk-based assessments, and transfers from unlicensed or foreign exchanges may still face rejection. On taxation, the Israel Tax Authority (ITA) treats cryptocurrency as a financial asset, not currency, subjecting individuals to a 25% capital gains tax upon sale or exchange. This policy is set to be reinforced by the Income Tax Ordinance Amendment (Digital Assets) draft memorandum from 2024-11-01, which aims to explicitly codify digital assets in the tax code. Furthermore, the Israel Securities Authority (ISA) retains authority to classify certain tokens as securities, and in August 2024 approved amendments allowing non-bank members of the Tel Aviv Stock Exchange (TASE) to offer crypto trading, indicating ongoing regulatory evolution within the sector.
Summary Points
I. Regulatory Status
* Retail cryptocurrency trading is legal and fully regulated.
* The status is Allowed-Regulated, requiring service providers to obtain a specific license.
II. Key Regulatory Bodies
* Capital Market, Insurance and Savings Authority (CMISA): The primary regulator for licensing and supervising Virtual Asset Service Providers (VASPs).
* Israel Tax Authority (ITA): Administers taxation of crypto assets, treating them as financial assets.
* Israel Money Laundering and Terror Financing Prohibition Authority (IMPA): Receives suspicious activity reports from crypto service providers.
* Bank of Israel (Supervisor of Banks): Issues banking directives, such as Directive 411, governing bank interactions with the crypto sector.
* Israel Securities Authority (ISA): May classify certain tokens as securities and regulates their trading.
III. Important Legislation
* Supervision of Financial Services (Regulated Financial Services) Law, 5776-2016 (Enacted: 2016-01-01): The foundational law establishing the licensing requirement for 'services in a financial asset,' which includes virtual currencies. It empowers the CMISA to supervise and sanction entities.
* Prohibition on Money Laundering Order (Obligations of Identification, Reporting and Record-Keeping of Financial Asset Service Providers) (Order 5778-2018) (Enacted: 2018-01-01): Applies Israel's AML/CTF framework to crypto service providers, mandating KYC, transaction monitoring, and suspicious activity reporting.
* Proper Conduct of Banking Business Directive 411 (Amendment) (Enacted: 2022-11-09): A banking directive prohibiting banks from refusing payment services or funds solely because they originate from licensed cryptocurrency activity.
* Income Tax Ordinance Amendment (Digital Assets) (Draft Memorandum 2024) (Enacted: 2024-11-01): A proposed memorandum to explicitly codify 'digital assets' in the tax code and clarify capital gains source rules, reinforcing existing policy.
IV. Compliance Requirements
* Licensing: Entities must obtain a 'Financial Asset Service Provider' license from the CMISA under the Supervision of Financial Services Law.
* AML/CTF: Strict obligations under the Prohibition on Money Laundering Order, including customer identification, reporting, and record-keeping.
* Taxation: Individuals must pay a 25% capital gains tax on profits from the sale or exchange of cryptocurrency, as it is classified as a financial asset.
* Banking Cooperation: Licensed entities must engage with banks under a risk-based approach as outlined in Directive 411.
V. Notable Restrictions or Limitations
* Banking Friction: Despite Directive 411, practical friction remains; banks apply rigorous risk assessments, and transfers from unlicensed or foreign exchanges may face rejection.
* Operational Ban: Operating as a crypto service provider without a CMISA license is prohibited and actively enforced.
* Securities Oversight: Tokens classified as securities by the Israel Securities Authority (ISA) fall under a separate, stricter regulatory regime.
VI. Recent Developments or Notes
* The CMISA demonstrated active enforcement by blocking and fining the 'Bitin' exchange in 2024/2025 for operating without a license.
* In August 2024, the Israel Securities Authority (ISA) approved amendments allowing non-bank Tel Aviv Stock Exchange (TASE) members to offer crypto trading.
* Israel has a very high rate of crypto adoption and tech development ('Startup Nation'), with regulations aiming to balance innovation with strict security and AML concerns, partly driven by the country's unique geopolitical security situation.
Full Analysis Report
Full Analysis Report
Israel has established a comprehensive and active regulatory environment for cryptocurrency, transitioning from a 'Gray-Zone' of uncertainty to a clearly 'Allowed-Regulated' status over the past few years. The primary legal framework is anchored in the Supervision of Financial Services (Regulated Financial Services) Law, 5776-2016, which requires any entity providing services in 'financial assets' (defined to include virtual currencies) to obtain a license from the Capital Market, Insurance and Savings Authority (CMISA). This licensing regime is not merely theoretical; permanent licenses have been issued to major local players such as Hybrid Bridge Holdings (September 2022) and Bits of Gold (September 2022), marking the formalization of the sector.
The regulatory landscape is further reinforced by strict Anti-Money Laundering (AML) and Counter-Terror Financing (CTF) rules. The Prohibition on Money Laundering Order, effective since 2018, obliges licensed providers to adhere to standards similar to those of banks, including customer identification (KYC) and reporting to the Israel Money Laundering and Terror Financing Prohibition Authority (IMPA). This high bar for compliance has allowed the Bank of Israel to issue Directive 411, a landmark banking rule that effectively forces banks to work with licensed crypto companies, prohibiting them from issuing sweeping refusals of service based solely on the involvement of crypto assets.
Taxation in Israel is explicit and enforced. The Israel Tax Authority (ITA) treats cryptocurrencies as assets rather than currency. Consequently, any profit from the sale or exchange of crypto is subject to Capital Gains Tax, typically at a rate of 25% for individuals. Recent legislative moves in late 2024, specifically a memorandum to amend the Income Tax Ordinance, aim to further codify these definitions and close loopholes regarding the location of the asset for tax purposes.
Enforcement actions demonstrate the regulator's commitment to this framework. In late 2024/early 2025, the CMISA took decisive action against 'Bitin', a local exchange operating without a license, blocking its access and imposing a significant fine. Furthermore, the Israel Securities Authority (ISA) continues to expand the market's scope, recently approving amendments in August 2024 that allow non-bank members of the Tel Aviv Stock Exchange (TASE) to offer crypto trading and custody services, signaling a move towards integrating crypto into the mainstream financial system.
Israel has established a comprehensive and active regulatory environment for cryptocurrency, transitioning from a 'Gray-Zone' of uncertainty to a clearly 'Allowed-Regulated' status over the past few years. The primary legal framework is anchored in the Supervision of Financial Services (Regulated Financial Services) Law, 5776-2016, which requires any entity providing services in 'financial assets' (defined to include virtual currencies) to obtain a license from the Capital Market, Insurance and Savings Authority (CMISA). This licensing regime is not merely theoretical; permanent licenses have been issued to major local players such as Hybrid Bridge Holdings (September 2022) and Bits of Gold (September 2022), marking the formalization of the sector. The regulatory landscape is further reinforced by strict Anti-Money Laundering (AML) and Counter-Terror Financing (CTF) rules. The Prohibition on Money Laundering Order, effective since 2018, obliges licensed providers to adhere to standards similar to those of banks, including customer identification (KYC) and reporting to the Israel Money Laundering and Terror Financing Prohibition Authority (IMPA). This high bar for compliance has allowed the Bank of Israel to issue Directive 411, a landmark banking rule that effectively forces banks to work with licensed crypto companies, prohibiting them from issuing sweeping refusals of service based solely on the involvement of crypto assets. Taxation in Israel is explicit and enforced. The Israel Tax Authority (ITA) treats cryptocurrencies as assets rather than currency. Consequently, any profit from the sale or exchange of crypto is subject to Capital Gains Tax, typically at a rate of 25% for individuals. Recent legislative moves in late 2024, specifically a memorandum to amend the Income Tax Ordinance, aim to further codify these definitions and close loopholes regarding the location of the asset for tax purposes. Enforcement actions demonstrate the regulator's commitment to this framework. In late 2024/early 2025, the CMISA took decisive action against 'Bitin', a local exchange operating without a license, blocking its access and imposing a significant fine. Furthermore, the Israel Securities Authority (ISA) continues to expand the market's scope, recently approving amendments in August 2024 that allow non-bank members of the Tel Aviv Stock Exchange (TASE) to offer crypto trading and custody services, signaling a move towards integrating crypto into the mainstream financial system.
Source Evidence
Primary and secondary sources cited in this analysis
"The Authority regulates the activities of supervised entities... including providers of services in a financial asset."
"Banking corporations will not be allowed to refuse to provide payment services solely due to the fact cryptocurrency is involved."
"The memorandum recognizes digital assets for the first time as capital assets subject to capital gains tax."
"Israel's Capital Markets, Insurance and Savings Authority granted a first permanent license to a private company, Hybrid Bridge Holdings Ltd."
"Digital asset service provider Bits of Gold has become the first local exchange to obtain a license from the Capital Markets Authority."
"CMISA ordered local access to the Bitin crypto exchange to be blocked... The regulator said the platform operated in Israel without a valid license."
Web Sources (7)
Sources discovered via web search grounding
Search queries used (9)
- Israel Securities Authority crypto regulation
- Israel crypto tax regulation 2024
- Bank of Israel Directive 411 crypto banking
- Israel cryptocurrency regulation retail trading status 2024 2025
- Capital Market Insurance and Savings Authority Israel crypto license list
- "Hybrid Bridge Holdings" Israel crypto license
- Israel CMISA crypto license "Bits of Gold" issued
- list of licensed financial asset service providers Israel crypto
- "Horizon" Israel crypto license
https://cryptorank.io/news/feed/230ea-israel-tighten-controls-stablecoin-issuers
https://blog.ueex.com/crypto-exchanges-in-israel/
https://bingx.com/es-la/news/post/israel-to-introduce-licensing-framework-for-stablecoin-issuers-ahead-of-digital-shekel-launch
https://www.binance.com/en/square/post/262257
https://practiceguides.chambers.com/practice-guides/blockchain-2025/israel/trends-and-developments
https://coingeek.com/israel-financial-regulator-grants-first-crypto-license-to-local-firm/
https://coincub.com/countries/israel/