Palestine, State of
Retail_Trading_Status
- Analysis ID
- #753
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- 2025-12-12 04:58
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Executive Summary
Retail cryptocurrency trading in Palestine exists in a regulatory gray zone. While not explicitly criminalized for individuals, the Palestine Monetary Authority (PMA) has issued repeated warnings against the use of virtual assets due to high risk and volatility, and local banks are generally prohibited from facilitating crypto-related transactions. A 2022 Anti-Money Laundering decree formally defines 'Virtual Assets' and 'Virtual Asset Service Providers' (VASPs) for compliance purposes, but no licensing regime is currently active to authorize exchanges.
Key Pillars
Palestine Monetary Authority (PMA): Primary financial regulator; issues warnings and controls banking sector interaction with crypto.
Financial Follow-Up Unit (FFU): The financial intelligence unit responsible for enforcing AML/CFT regulations, including those applicable to virtual assets under the 2022 Decree Law.
Palestine Capital Market Authority (PCMA): Regulates non-banking financial sectors; has expressed interest in fintech and sandboxes but has not yet licensed crypto trading platforms.
Landmark Laws
Decree Law No. (39) of 2022 On Anti-Money Laundering and Counter-Terrorism Financing (Decree Law No. (39) of 2022) - Enacted: 2022-07-04
- Explicitly defines 'Virtual Assets' and 'Virtual Asset Service Providers' (VASPs). It classifies VASPs as reporting entities subject to AML/CFT obligations, customer due diligence, and suspicious activity reporting, effectively bringing the sector under legal scrutiny without establishing a commercial licensing framework.
- Source
PMA Warnings on Virtual Currencies (Various Public Statements) - Enacted: 2017-01-01
- The PMA has consistently issued public warnings advising citizens against trading in cryptocurrencies, citing lack of supervision, high volatility, and the absence of legal protection.
Considerations
Geopolitical Constraints: The Palestinian financial system is heavily dependent on the Israeli banking system and the Israeli Shekel (ILS). Israeli authorities have the capacity to seize crypto funds associated with Palestinian accounts if linked to illicit financing (e.g., the 2024 seizure of funds on Binance alleged to be linked to Hamas).
Banking Blockade: Local Palestinian banks do not process transfers to crypto exchanges, forcing users to rely on P2P markets or informal hawala networks.
CBDC Ambitions: The PMA is actively researching a Central Bank Digital Currency (Digital Palestinian Pound) to achieve some monetary independence from the Israeli Shekel.
AML/CFT Risks: Due to the conflict environment, crypto transactions are under extreme scrutiny for terrorism financing risks by both local and international bodies.
Notes
The regulatory situation is uniquely complicated by the lack of a national currency (reliance on ILS, USD, JOD) and the lack of full control over borders and financial clearing, which are controlled by Israel. This makes independent crypto regulation difficult to enforce without Israeli cooperation.
Remaining Uncertainties
- Whether the PCMA has a specific timeline for issuing licenses to VASPs under the 2022 AML framework.
- The exact scope of the banking ban—whether it is a formal written circular or verbal guidance to banks to reject crypto-related transfers.
- How the potential introduction of a Palestinian CBDC would impact the legality of private cryptocurrencies like Bitcoin.
Detailed Explanation
Detailed Explanation
Retail cryptocurrency trading in the State of Palestine exists in a regulatory gray zone, meaning it is not explicitly criminalized for individuals but operates without formal authorization and under significant official caution. The primary regulatory framework is established by Decree Law No. (39) of 2022 On Anti-Money Laundering and Counter-Terrorism Financing, enacted on July 4, 2022. This law formally defines 'Virtual Assets' and 'Virtual Asset Service Providers' (VASPs), classifying VASPs as reporting entities subject to Anti-Money Laundering and Counter-Terrorism Financing (AML/CFT) obligations, including customer due diligence and suspicious activity reporting. However, this decree does not establish a commercial licensing regime for crypto exchanges, leaving them legally scrutinized but without a formal path to authorization. The Palestine Monetary Authority (PMA), as the primary financial regulator, has issued repeated public warnings since at least 2017, advising citizens against trading in cryptocurrencies due to high risk, volatility, and lack of legal protection and supervision. The Financial Follow-Up Unit (FFU) serves as the financial intelligence unit responsible for enforcing the AML/CFT regulations applicable to virtual assets under the 2022 decree. The Palestine Capital Market Authority (PCMA) has expressed interest in fintech but has not licensed any crypto trading platforms. The regulatory environment is further constrained by a de facto banking blockade, as local Palestinian banks are generally prohibited from processing transfers to cryptocurrency exchanges, forcing users to rely on peer-to-peer markets or informal networks. This situation is uniquely complicated by Palestine's geopolitical and financial context, including its heavy dependence on the Israeli banking system and the Israeli Shekel, and the lack of full control over borders and financial clearing, which are controlled by Israel. Consequently, independent enforcement of crypto regulations is difficult without Israeli cooperation, and transactions face extreme scrutiny for terrorism financing risks by both local and international bodies, as evidenced by the 2024 seizure of crypto funds on Binance alleged to be linked to Hamas by Israeli authorities. Amidst this, the PMA is actively researching a Central Bank Digital Currency (Digital Palestinian Pound) as a potential avenue for achieving greater monetary independence.
Summary Points
I. Regulatory Status
* The regulatory status for cryptocurrency is a Gray-Zone.
* Retail trading is not explicitly criminalized for individuals.
* There is no active licensing regime for Virtual Asset Service Providers (VASPs).
* The sector operates under significant official warnings and restrictions.
II. Key Regulatory Bodies
* Palestine Monetary Authority (PMA): The primary financial regulator.
* Issues public warnings against crypto use.
* Controls the banking sector's interaction with crypto.
* Is researching a Central Bank Digital Currency (CBDC).
* Financial Follow-Up Unit (FFU): The financial intelligence unit.
* Enforces AML/CFT regulations, including those for virtual assets under the 2022 decree.
* Palestine Capital Market Authority (PCMA): Regulates non-banking financial sectors.
* Has expressed interest in fintech and regulatory sandboxes.
* Has not licensed any cryptocurrency trading platforms.
III. Important Legislation
* Decree Law No. (39) of 2022 On Anti-Money Laundering and Counter-Terrorism Financing (Enacted: 2022-07-04).
* Explicitly defines 'Virtual Assets' and 'Virtual Asset Service Providers' (VASPs).
* Classifies VASPs as reporting entities subject to AML/CFT obligations.
* Does not establish a commercial licensing framework for exchanges.
* PMA Warnings on Virtual Currencies (Various Public Statements, since at least 2017).
* Consistently advises citizens against trading, citing lack of supervision, high volatility, and absence of legal protection.
IV. Compliance Requirements
* For entities defined as Virtual Asset Service Providers (VASPs) under Decree Law No. (39) of 2022:
* Subject to AML/CFT obligations.
* Must perform customer due diligence.
* Must report suspicious activities.
V. Notable Restrictions or Limitations
* Banking Blockade: Local Palestinian banks are generally prohibited from facilitating crypto-related transactions or processing transfers to exchanges.
* Geopolitical & Systemic Constraints:
* The Palestinian financial system is heavily dependent on the Israeli banking system and the Israeli Shekel (ILS).
* Israeli authorities have demonstrated the capacity to seize crypto funds associated with Palestinian accounts (e.g., 2024 Binance seizure).
* Lack of a national currency and full control over financial clearing makes independent crypto regulation difficult to enforce.
* High AML/CFT Scrutiny: Due to the conflict environment, crypto transactions are under extreme scrutiny for terrorism financing risks by local and international bodies.
VI. Recent Developments or Notes
* The PMA is actively researching a Central Bank Digital Currency (Digital Palestinian Pound).
* The 2022 AML decree formally brought the virtual asset sector under legal scrutiny.
* Users are forced to rely on P2P markets or informal hawala networks due to the banking restrictions.
* The regulatory situation is uniquely complicated by the lack of full control over borders and financial clearing.
Full Analysis Report
Full Analysis Report
The regulatory status of cryptocurrency in the State of Palestine is best classified as 'Gray-Zone'. There is no explicit law criminalizing the possession or trading of cryptocurrencies by private individuals, and the 2022 Anti-Money Laundering Decree Law explicitly recognizes 'Virtual Assets' and 'VASPs' within its definitions. This inclusion suggests a legislative intent to regulate rather than ban the sector entirely. However, in practice, the environment is highly restrictive. The Palestine Monetary Authority (PMA) has not issued operational licenses for any crypto exchanges, and it actively discourages the public from engaging with virtual currencies through repeated risk warnings.
The operational reality for retail traders is defined by financial isolation. Palestinian banks, which operate under the supervision of the PMA and are inextricably linked to the Israeli banking correspondent system, are effectively barred from processing transactions related to crypto assets. This forces retail activity into informal channels or peer-to-peer (P2P) networks. Furthermore, the unique geopolitical situation subjects Palestinian crypto users to external enforcement actions; notably, Israeli authorities have seized cryptocurrency funds held in wallets associated with Palestinian entities on major global exchanges like Binance, citing counter-terrorism financing statutes.
Legislatively, the 'Decree Law No. (39) of 2022' is the most significant development. By defining VASPs and subjecting them to the oversight of the Financial Follow-Up Unit (FFU), the State of Palestine has aligned its AML/CFT framework with FATF recommendations. This creates a theoretical legal structure where a VASP could exist if licensed, but without a complementary licensing regulation from the PCMA or PMA, the sector remains in limbo—recognized for compliance obligations but unauthorized for commercial operation.
Future developments appear focused on state-backed initiatives rather than liberalizing private crypto trading. The PMA has publicly discussed plans for a sovereign digital currency (CBDC) to reduce reliance on the Israeli Shekel, which currently serves as the primary medium of exchange. Until such a project launches or the licensing framework for private VASPs is operationalized, retail trading remains a 'use at your own risk' activity, devoid of consumer protection and subject to high legal and geopolitical risks.
The regulatory status of cryptocurrency in the State of Palestine is best classified as 'Gray-Zone'. There is no explicit law criminalizing the possession or trading of cryptocurrencies by private individuals, and the 2022 Anti-Money Laundering Decree Law explicitly recognizes 'Virtual Assets' and 'VASPs' within its definitions. This inclusion suggests a legislative intent to regulate rather than ban the sector entirely. However, in practice, the environment is highly restrictive. The Palestine Monetary Authority (PMA) has not issued operational licenses for any crypto exchanges, and it actively discourages the public from engaging with virtual currencies through repeated risk warnings. The operational reality for retail traders is defined by financial isolation. Palestinian banks, which operate under the supervision of the PMA and are inextricably linked to the Israeli banking correspondent system, are effectively barred from processing transactions related to crypto assets. This forces retail activity into informal channels or peer-to-peer (P2P) networks. Furthermore, the unique geopolitical situation subjects Palestinian crypto users to external enforcement actions; notably, Israeli authorities have seized cryptocurrency funds held in wallets associated with Palestinian entities on major global exchanges like Binance, citing counter-terrorism financing statutes. Legislatively, the 'Decree Law No. (39) of 2022' is the most significant development. By defining VASPs and subjecting them to the oversight of the Financial Follow-Up Unit (FFU), the State of Palestine has aligned its AML/CFT framework with FATF recommendations. This creates a theoretical legal structure where a VASP could exist if licensed, but without a complementary licensing regulation from the PCMA or PMA, the sector remains in limbo—recognized for compliance obligations but unauthorized for commercial operation. Future developments appear focused on state-backed initiatives rather than liberalizing private crypto trading. The PMA has publicly discussed plans for a sovereign digital currency (CBDC) to reduce reliance on the Israeli Shekel, which currently serves as the primary medium of exchange. Until such a project launches or the licensing framework for private VASPs is operationalized, retail trading remains a 'use at your own risk' activity, devoid of consumer protection and subject to high legal and geopolitical risks.
Source Evidence
Primary and secondary sources cited in this analysis
"Virtual assets: A digital representation of value that can be digitally traded, or transferred, and can be used for payment or investment purposes."
"The PMA has launched a new digital project to enhance the integration of financial technology... This initiative aligns with its digital transformation strategy."
"VASP means any person who, as a business, conducts one or more of the following activities... Exchange between virtual assets and fiat currencies."
"Binance has only blocked a few Palestinian users' accounts over links to illicit funds and has not seized the assets of all Palestinians."
"The Palestine Monetary Authority is studying the possible issuance of a digital currency, a move that would allow it to strike at least a symbolic blow for monetary independence."
Web Sources (3)
Sources discovered via web search grounding
Search queries used (5)
- Palestine Monetary Authority cryptocurrency regulation status
- Palestine digital currency initiative PMA
- Palestine crypto trading ban or legal
- Palestine AML CFT law virtual assets
- Palestine Capital Market Authority virtual assets circular