Israel’s Crypto Industry Seeks Regulatory Changes Amid Public Support

• Reforming digital asset regulations in Israel could potentially add 70,000 jobs and contribute $38 billion to the economy.
• Public support is growing for relaxed stablecoin and tokenization rules, as well as simplified tax compliance.
• Despite challenges with traditional banks, Israeli companies are leading in the global digital assets sector.
• The National Crypto Strategy Committee and the Israel Tax Authority are working to integrate cryptocurrency into the mainstream economy.
• Banking hesitancy and high tax rates on tokenized stock options remain significant hurdles for the industry.

WEEX Crypto News, 2026-02-10 09:36:15

The burgeoning cryptocurrency industry in Israel is at a pivotal moment as it seeks to transform regulatory landscapes amid mounting public interest and significant economic potential. This movement, led by the Israeli Crypto Blockchain & Web 3.0 Companies Forum, aims to foster an environment conducive to digital asset growth, driven by the robust statistical backing that projects substantial economic benefits if the appropriate regulations are adopted.

The Economic Promise of a Crypto-Friendly Israel

According to a compelling report by consulting firm KPMG, proposed reforms in Israel’s digital asset regulations could potentially inject 120 billion shekels ($38 billion) into the national economy by 2035, alongside the creation of 70,000 new jobs. These figures underscore the substantial weight the industry carries in economic discussions, positioning it as a key player in the ongoing evolution of Israel’s financial ecosystem.

The Israeli Crypto Blockchain & Web 3.0 Companies Forum plays a central role in advocating for these changes. At a recent gathering on February 3 in Tel Aviv, the forum’s leader, Nir Hirshman-Rub, emphasized the broad public support for legislation that would ease regulations on stablecoins and tokenization processes, in addition to making tax compliance less cumbersome. With these changes, companies dealing in digital currencies would have a more straightforward pathway to contributing to the economy.

The Public’s Growing Crypto Engagement

One of the most compelling arguments for regulatory reform is the growing engagement of the Israeli public with digital assets. According to research by KPMG, over the past five years, more than a quarter of Israelis have engaged in cryptocurrency transactions, and over 20% currently own digital assets. This significant level of public involvement signals a readiness among the citizenry for more institutional and structural recognition of digital currencies.

This backdrop supports Hirshman-Rub’s assertion that the public is prepared and expecting political leaders to act. The comprehensive engagement with cryptocurrencies points to a cultural and economic shift that regulatory frameworks need to catch up with in order to ensure that they foster growth rather than stifle innovation.

Industry Steadiness and Banking Challenges

The October report from Chainalysis highlighted steady growth in Israel’s cryptocurrency economy, with last year’s inflows surpassing $713 billion. These figures reflect heightened activity in the wake of the October 2023 Hamas attacks, sustaining increased crypto volume primarily through retail activities.

Israeli companies, such as Fireblocks and Starkware, have not only carved out leadership positions in the global digital asset arena but also actively sponsor initiatives aimed at improving these frameworks. However, despite their success and proactive stance, they continue to face significant hurdles imposed by traditional financial institutions.

A recurring issue is the reluctance of Israeli banks to accommodate companies dealing with digital assets. Banks often require declarations from company attorneys that funds originating from digital transactions will not enter Israeli accounts, a demand seen as unfeasible by companies. This has resulted in frustrating due diligence processes that delay essential financial operations for these businesses.

Reformation Goals and Legislative Hurdles

The Forum’s advocacy extends to various areas, including reforming an income tax ordinance that disproportionately taxes token distributions to employees. Unlike traditional stock options which are subject to a 25% tax rate, tokenized options face a 50% rate for similar value, presenting significant disincentives for companies looking to attract talent through innovative compensation packages.

In July, the advancement of these discussions saw the National Crypto Strategy Committee deliver an interim report to the Israeli Knesset. This strategic proposal lays out five foundational pillars, including establishing a centralized regulatory authority, introducing clear token issuance guidelines, and fostering integration with the banking sector. These steps are vital for laying the groundwork for a comprehensive national strategy on cryptocurrency.

Voluntary Disclosure and Taxation

The Israel Tax Authority has also taken steps to address the taxation of digital assets, most notably through a proposed Voluntary Disclosure Procedure introduced in August. Aimed at encouraging taxpayers to disclose previously undeclared income, this initiative seeks to offer immunity from prosecution while collecting revenue due from digital asset holdings.

Despite its potential benefits, participation in this program has fallen short of expectations. Many attribute this to the continued reluctance of banks to accept and process funds originating from cryptocurrency transactions, which significantly diminishes the appeal of voluntary disclosure. According to Shay Aharonovich, director of the Tax Authority, this banking hesitancy is a major factor that dissuades taxpayers from engaging with the initiative, as the inability to utilize the funds effectively diminishes the incentive to comply.

Assessing the Path Forward

The trajectory of Israel’s cryptocurrency industry hinges on overcoming these existing barriers, particularly those related to banking and taxation. As we progress towards 2035, the year projected for achieving the full economic impact of these reforms, the alignment of public support with robust legal frameworks will be critical. For Israel, the path forward rests on bridging the gap between the innovative capabilities of its tech industry and the cautious policies of its financial institutions.

The Israeli crypto landscape is populated with innovators eager to make a mark on the global scene. Yet, achieving a mature and integrated cryptoeconomy remains dependent on the harmonization of these ambitions with the necessary regulatory reforms—a challenge the nation is addressing head-on.

In this context, platforms like WEEX stand to benefit from a symbiotic relationship with emerging regulations and could embody the ideals of future-facing digital marketplaces. These platforms can leverage Israel’s tech-savvy environment and public backing to not only capitalize on existing market opportunities but also shape the global narrative around digital assets.

Frequently Asked Questions

What is the current status of cryptocurrency regulation in Israel?

Israel is in the process of reforming its cryptocurrency regulations, driven by public support and significant economic incentives. The reforms aim to simplify regulatory frameworks, particularly concerning stablecoins and tokenized assets, and improve banking integration.

How does public opinion in Israel view cryptocurrency?

Public sentiment towards cryptocurrency in Israel is quite favorable, with over 25% of the population having engaged with digital assets over the past five years. This level of engagement reflects a readiness for more formal integration of cryptocurrencies within the economy.

What are the main challenges faced by Israeli cryptocurrency companies?

Israeli cryptocurrency companies primarily face challenges related to banking services and taxation. Banks are often hesitant to process funds from digital asset transactions, and the taxation framework currently imposes high rates on tokenized assets, both of which impede the sector’s growth.

What economic impact could regulatory changes in cryptocurrency have on Israel?

Reforming cryptocurrency regulations in Israel could potentially add 120 billion shekels ($38 billion) to the national economy by 2035 and create approximately 70,000 jobs, underscoring the significant economic potential of the industry.

What is the Voluntary Disclosure Procedure concerning cryptocurrency in Israel?

The Voluntary Disclosure Procedure by the Israel Tax Authority offers taxpayers a framework to disclose undeclared income from digital assets in exchange for immunity from prosecution. However, participation has been limited due to banking reluctance to handle funds from digital transactions.