ISRAEL Trends and Developments Contributed by: Ohad Phillip, Shaul Zioni, Lior Kiperman and Avia Alon, Zioni Pillersdorf Phillip Advocates
Voluntary disclosure returns as a practical tool In August 2025, the Israel Tax Authority announced a new temporary voluntary disclosure procedure, valid until 31 August 2026. The procedure allows tax- payers, subject to conditions, to disclose previously unreported income and assets and receive protection from criminal proceedings in relation to the disclosed matters. This is particularly relevant for crypto holders. Many Israeli users bought, sold or swapped digital assets over several years without fully understanding the reporting consequences. Some also faced difficulty bringing money into Israel because banks required proof that tax had been paid or that the funds were otherwise compliant. The Israel Tax Authority’s implementation guid- ance refers specifically to digital assets. It requires details such as public wallet addresses, relevant bank accounts and year-end balances of digital assets cov- ered by the agreement. This shows that crypto is no longer being handled only through general tax princi- ples, but as a specific compliance category requiring blockchain-specific information. The digital shekel project gains substance The Bank of Israel’s work on the digital shekel is not the same thing as private crypto regulation, but it belongs in the same market story. A central bank digi- tal currency would not be decentralised like bitcoin, and it would not be a private stablecoin like BILS. Still, it reflects the same broad shift: money, payments and settlements are becoming more digital, programmable and infrastructure-based. In March 2025, the Bank of Israel published a prelimi- nary design for the digital shekel system. In May 2026, it published a progress report for 2025, stating that it had continued examining the possible issuance of a central bank digital currency and that work in 2026 would focus on prioritisation, detailed design and an issuance roadmap. The Bank also stated that a rec- ommendation document on whether to issue a digital shekel is expected to be submitted to the governor towards the end of the year.
markets. This creates opportunities for policy change, but also means that timing may depend on elections, coalition priorities and budgetary legislation. The State Comptroller puts crypto taxation under the spotlight The State Comptroller’s November 2024 report on taxation of digital currencies was one of the most important public documents on the Israeli crypto mar- ket. The report stated that estimates of the number of digital currency holders in Israel in 2023 ranged from about 0.2 million to 1.67 million, while the potential tax collection from crypto activity was estimated at about ILS2 billion to ILS3 billion. It also noted that only an average of around 500 reports per year were sub- mitted to the Israel Tax Authority between 2018 and 2022, compared with a minimum potential reporting population estimated at around 200,000. Those figures are important because they show the scale of the gap between market activity and tax administration. The problem is not only taxpayer non- compliance. It is also the difficulty of reporting high- volume trading, wallet transfers, token swaps, staking, airdrops and historical cost bases through systems that were not designed for blockchain activity. The report also gives policymakers a reason to act. If Israel wants to collect tax efficiently, it needs clearer rules, better digital reporting systems and a more practical path for taxpayers to regularise historical activity. For businesses, the message is straightfor- ward: tax treatment of crypto is no longer a niche issue, and documentation, transaction history and source-of-funds records should be built into opera- tions from the start. The banking challenge also has a direct effect on the ability to pay taxes in Israel. In practice, this can create absurd situations in which taxpayers want to report income and pay the tax due, but are unable to do so effectively because the banking system is unwilling to accept funds sourced from the sale of digital assets. This disconnect between tax compliance obligations and banking access remains one of the most acute structural problems in the Israeli crypto market.
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