ISRAEL Trends and Developments Contributed by: Ohad Phillip, Shaul Zioni, Lior Kiperman and Avia Alon, Zioni Pillersdorf Phillip Advocates
For clients, the digital shekel matters even before any final issuance decision. It could affect payment ser- vice providers, banks, wallet providers, fintech plat- forms, merchants and government payment systems. It also affects the policy environment around private stablecoins, because a future digital shekel would raise questions about interoperability, competition and the division of roles between central bank money and private digital money. The government builds a public crypto regulation portal A quieter but useful development is the creation of a central public information page on crypto-asset regulation in Israel. The Bank of Israel’s page on “Regulation of crypto-assets in Israel” brings togeth- er information on banking, licensing, tax reporting, securities supervision and anti-money laundering. It includes references to Section 87A of Directive 411, the requirement for banks to conduct dedicated risk assessments, and the principle that refusal should not be based solely on the virtual-currency character of the activity. This type of public-facing co-ordination is valuable in a fragmented regulatory system. In Israel, crypto may involve the Capital Market Authority, the Bank of Israel, the Israel Securities Authority, the Israel Tax Authority and anti-money laundering authorities. A single business model can touch all of these bodies at once. The portal does not solve the legal uncertainty by itself. However, it helps clients understand which reg- ulator is relevant to which part of the activity. It also signals that Israeli regulators are trying to create a more coherent public map of the field. Licensing reform and the question of foreign players Another important trend is the expected reform of licensing rules under the Supervision of Financial Ser- vices Law. Public reporting in early 2026 described a proposed Amendment 17 that could ease entry for for- eign players in crypto and non-bank credit by allow- ing tailored licences for foreign corporations that are already supervised abroad. The report emphasised that this would not amount to full European-style
passporting, but rather an ad hoc licensing model subject to regulator discretion and conditions. If adopted, this could matter greatly for Israeli con- sumers and businesses. At present, foreign crypto platforms often face practical and legal uncertainty when serving Israeli users. A tailored licensing path could increase competition while allowing the regula- tor to impose local standards on reporting, govern- ance, capital, product limits and consumer protection. Unlike passporting regimes in the European Union, this model does not appear to be based on reciprocity. In other words, Israel may be prepared to ease licens- ing access for entities from jurisdictions that do not necessarily offer comparable access to Israeli firms seeking to operate there. That distinction is impor- tant, because it suggests that the proposed reform is driven primarily by domestic regulatory and mar- ket considerations, rather than by a mutual market- access arrangement. For clients, the key point is that Israel appears to be considering a more flexible model. The country wants access to international financial innovation, but it is unlikely to accept unregulated cross-border activity as the solution. Foreign platforms should therefore monitor this reform closely and prepare for a licens- ing model that may be more accessible than full local incorporation, but still meaningfully supervised. Stablecoin legislation is likely to move up the agenda The BILS approval shows that Israel can approve a supervised stablecoin product under existing tools, but it also highlights the need for a dedicated statu- tory framework. Public reporting has indicated that the Capital Market Authority intends to promote leg- islation that would give it licensing, supervision and enforcement powers over stablecoin issuers. The policy questions are familiar from other juris- dictions. What assets may back a stablecoin? Must reserves be held in segregated accounts? What redemption rights do holders have? Who supervises custodians, technology providers and issuers? What happens if the issuer becomes insolvent?
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