ISRAEL Trends and Developments Contributed by: Ohad Phillip, Shaul Zioni, Lior Kiperman and Avia Alon, Zioni Pillersdorf Phillip Advocates
The Bit2C transaction and market consolidation A second major development is the proposed acqui- sition of Bit2C’s activity by a company connected to eToro. Bit2C is one of Israel’s long-standing crypto exchanges. The Asset Purchase Agreement reviewed for this article states that December S.B Ltd is the pur- chaser, BitTwoC Ltd is the seller, and Bit2C operates a licensed cryptocurrency brokerage and exchange in Israel. Based on information reportedly provided to the com- pany’s shareholders and later published on social media, the transaction also appears to have the char- acteristics of a distressed sale. According to these reports, Bit2C lost access, at least temporarily, to two of its wallets. This reportedly created a shortfall in the assets the company was required to hold in order to meet its obligations. According to the transaction structure as publicly described, the purchaser is expected to cover that shortfall and add approximately 15 bitcoin, while acquiring Bit2C’s entire operating business, includ- ing the team that will continue to run the activity. If accurate, these facts suggest that the deal should be understood not only as a consolidation transaction, but also as a rescue mechanism intended to preserve operational continuity and protect customers. For the Israeli crypto market, this is also a significant development because eToro is a large international group with a proven track record of innovation. Its entry into this transaction may strengthen market confidence, bring additional operational and techno- logical capabilities, and signal that established global players continue to see strategic value in the Israeli crypto sector. Banking access remains the central bottleneck Despite regulatory progress, access to ordinary bank- ing services remains one of the most important prac- tical barriers for crypto activity in Israel. The current regulatory framework already recognises that banks should not refuse payment services merely because a transaction is connected to virtual currencies, provid- ed that the relevant virtual currency service provider is licensed and the bank applies a risk-based approach. The Bank of Israel’s public guidance on Proper Con-
duct of Banking Business Directive 411, Section 87A, reflects this principle. However, market practice has not fully matched the policy objective. Businesses and individuals still report difficulty depositing funds derived from crypto activ- ity, even where documentation exists. This is why the current work around Section 87A of Directive 411 is important. Based on current market information, the Bank of Israel has been preparing a further amend- ment, including through round-table discussions with banks and leading crypto companies, co-ordinated with the Israeli Crypto, Blockchain and Web3 Com- panies Forum. The amendment has not yet been published for pub- lic comment. It should therefore be described as a live regulatory process, not as completed law. If it is published and ultimately adopted, it could become one of the most practically important developments for the industry, because banking access is often the difference between a compliant local business and a business that moves activity abroad. The industry moves from lobbying to public campaigning Another development is the public campaign launched by the Israeli Crypto, Blockchain and Web3 Companies Forum to promote a national crypto reform. According to the Forum’s website, its members include major Israeli ecosystem participants such as Fireblocks, Bits of Gold, SSV Networks, Collider VC, Fuse and the Israeli Bitcoin Association. The Forum identifies bank- ing barriers, tax payment difficulties and regulatory gaps as major obstacles for the local industry. The campaign is notable because it moves the indus- try from technical discussions with regulators into the broader political arena. Public reports have described the campaign as an attempt to place crypto reform on the agenda ahead of an election year, with claims that a comprehensive reform could contribute jobs and GDP growth over the next decade. For clients, the political context is relevant. Crypto regulation is no longer treated only as a narrow com- pliance issue. It is increasingly framed as part of Isra- el’s competitiveness in technology, fintech and capital
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