ISRAEL Trends and Developments Contributed by: Ohad Phillip, Shaul Zioni, Lior Kiperman and Avia Alon, Zioni Pillersdorf Phillip Advocates
Zioni Pillersdorf Phillip Advocates 8 Shaul Hamelech Blvd PO 40002 Tel Aviv Israel
Tel: + 972 3 524 4442 Fax: + 972 3 716 5379 Email: office@zplaw.co.il Web: www.zplaw.co.il/en
Israel’s Crypto and Blockchain Market: From Regulatory Friction to Regulated Infrastructure Israel’s crypto and blockchain market has entered a more mature, and more complicated, phase. The story of the past year is no longer only about speculative trading, token prices or the collapse of global plat- forms. It is increasingly about whether Israel can turn a strong technology base into a functioning regulated market. For clients looking at Israel, the key development is that crypto is moving from the margins of finan- cial activity towards the regulated financial system. That process is uneven. On one hand, regulators are approving concrete products, the Bank of Israel is deepening its work on digital money and established players are consolidating market positions. On the other hand, companies and users still face practical barriers in banking, taxation and licensing. The result is a market with real opportunity, but also legal and operational friction. Any business consid- ering activity in Israel should understand both sides: Israel has deep blockchain talent, sophisticated finan- cial regulators and a large local user base, but the regulatory architecture is still being built while the mar- ket is already operating. A regulated shekel stablecoin becomes a reality The most visible regulatory milestone was the approv- al granted to Bits of Gold for the launch of BILS, a shekel-pegged stablecoin. This is significant because it moves the Israeli market beyond crypto as an
investment product and towards blockchain-based payment and settlement infrastructure. The approval followed a lengthy regulatory process and positions BILS as a regulated shekel-denominated digital token backed on a 1:1 basis. For the local market, the approval is important for three reasons. First, it creates a supervised model for issuing a shekel-linked token rather than relying only on dollar stablecoins such as USDC or USDT. Sec- ondly, it may help Israeli fintechs and Web3 compa- nies build products that require on-chain shekel liquid- ity. Thirdly, it gives the Capital Market, Insurance and Savings Authority practical experience in supervising a live stablecoin product, not merely consulting on policy. This does not mean that Israel now has a complete stablecoin statute. It means that a regulated product has been permitted within an existing supervisory framework. For clients, that distinction matters. A product-level approval can open the door for innova- tion, but it does not replace the need for broader leg- islation on reserve assets, redemption rights, custody, disclosure, governance and insolvency treatment. As discussed further below, the Capital Market, Insur- ance and Savings Authority is currently working on draft legislation to regulate the stablecoin sector. Although it is not yet known when exactly the draft will be released for public comment, it is reasonable to estimate, cautiously, that this may happen within the coming months.
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