Legal Crypto In Israel

Overview of Cryptocurrency Legality in Israel

Legal Status of Cryptocurrency

Cryptocurrencies are not considered legal tender in Israel, and therefore not accepted as an official payment method for goods and services like the new Israeli Shekel (NIS). Nonetheless, it is legal for private parties to trade cryptocurrencies for shekels and the use of virtual currencies is generally legal, but is regulated and taxed in detail. In this regard, the Israeli government has suggested a careful, though also progressive, policy stance to regulation of cryptocurrencies, in the sense of seeking to balance the encouragement to innovation against the protection of consumers and the stability of the financial system. Being the International technology hub – aptly named "Start-Up Nation" – has caused Israel to build up a crowded blockchain haven, competing with others around the world and watching new projects grow in cities such as Tel Aviv and Herzliya.

Regulatory Framework

No single authority or law governs cryptocurrencies in Israel, and the area is mainly concerned with anti-money laundering (AML), taxation, and licensing crypto-related companies. The following is a summary of the main laws and regulations applicable to the cryptocurrency market in Israel:

Anti-money laundering (AML) and counter-terrorism financing (CTF)

Prohibition on Money Laundering Order The Prohibition on Money Laundering Order (Prohibition Order) was amended in 2018 to cover businesses providing cryptocurrency services, obliging them to comply with AML/CTF measures (including customer identification (KYC), transaction monitoring, and reporting to the Israel Money Laundering and Terror Financing Prohibition Authority (IMPA). The ISA has been regulating crypto companies since 2016, but the first license for a crypto provider was issued in September 2022, indicating a slow path to regulation.

Taxation

The Israel Tax Authority (ITA) designates cryptocurrencies as “assets”, not as “currency”. Holdings traded or exchanged for fiat currencies can be taxed between 15% to 33% as capital gains if held as an individual, depending on whether it’s personal or business related transactions of cryptocurrencies. What are the VAT implications of using digital currency to make a payment for goods or services? As reported, a bill proposed in December 2024 (and under review as of June 2025) is attempting to exempt foreign residents from capital gains tax on cryptocurrency trading, as part of a one of a kind initiative to turn Israel into a crypto haven.

Securities Regulation

The Israel Securities Authority (ISA) determines whether the cryptocurrency or the token meet the criteria for securities under the Securities Law, 1968. Equity and investment offering tokens need to be in compliance with securities regulations, especially where registration and disclosure are concerned. Some of the ICO and token sales are being investigated, in cases where they have offered future profits or dividends.

Banking and Finance Supervision

The Bank of Israel does not directly regulate cryptocurrencies but monitors stability of the financial system, warning of risks from volatility and illegal uses. Several Israeli banks have avoided dealing with crypto-related companies over concerns related to money laundering, but clearer regulations have forced some to now work with licensed crypto firms. Unusually, the Bank of Israel has investigated blockchain tech for its potential application in a CBDC, with 2024 pilots noted to test a digital shekel.

Common Exchanges And Methods Of Exchange

Several cryptocurrency exchanges work in Israel due to its large tech-savvy population. The Tel Aviv-based, licensed exchange helps people buy bitcoin and ethereum using a credit card or wire transfers, via partnerships with nearby retail stores like post offices. eToroX, the crypto division of the global investment company based in Holon, Israel, provides trading for many cryptocurrencies. There are many internationally-based exchanges such as Binance, Coinbase, and Kraken that also have a considerable following, and support NIS deposits but don’t carry local licenses. Exchange methods Bank transfer (most popular) Credit/debit cards (3–5% fees) ATM through Bits of Gold Crypto ATMs in cities such as Tel Aviv or Haifa

Decentralized Finance (DeFi)

There are currently no specific regulations for DeFi in Israel as of June 2025. Regulators have also given only sparse guidance for DeFi platforms and for activities such as decentralized lending or providing liquidity, leaving a range of questions unanswered. AML/CTF regulations could also apply to custodial DeFi services, whilst non-custodial protocols are left in a regulatory no-man’s-land. Israeli startups like Bancor, which was launched in Ramat Gan, are among the creators of a class of technology known as decentralized exchange protocols, which have global import but also sometimes work internationally to sidestep homegrown confusion. DeFi is being watched by the ISA and the Bank of Israel, who could enforce regulations if any risks to financial stability or consumers emerge. One unique player to contribute to Israel is its academic research, with institutions such as Tel-Aviv University where there are blockchain labs which are researching DeFi protocols.

Non-Fungible Tokens (NFTs)

Israel’s NFT market is expanding, with art and collectibles leading the way, fueled by a burgeoning creative scene in the country. NFTs are considered digital assets, and so any profit made from selling an NFT would be subject to capital gains tax (15%–33%). NFTs may be considered securities by the ISA if they serve as investment instruments or partial investments. Israeli artists, particularly in Tel Aviv’s art district, have turned to platforms like OpenSea and Rarible for minting and trading NFTs. There are no NFT marketplace AML/CTF regulations, but platforms with custody offerings may have to adhere to rules around financial service providers. A lack of specific NFT laws is great for innovative development, but has everyone worried about fraud or protecting their copyrights. Uniquely, Israel’s NFT scene is backed by cultural ventures, for example NFT exhibitions at the Bloomfield Science Museum in Jerusalem, presenting digital artworks.

Useful Information

• Crypto Investment Education: Israel’s Ministry of Economy and Industry has workshops on cryptocurrency investment risks, available through regional business development centers.
• Startup Incubators: Blockchain startups receive funding from Israel Innovation Authority in a variety of programs such as the Tnufa Initiative, which is not replicated in any other tech ecosystem in Israel.
• Tax Consultation Services: Licensed accountants for tax compliance with Israel and can services based on ITA’s asset classification.
• Blockchain Hackathons: Regularly scheduled annual events in Tel Aviv — such as those organized by the likes of Israel Blockchain Association — are helping to drive crypto innovation and networking.
• NFT Art Grants: The Israel Ministry of Culture offers grants for digital artists drilling into NFTs, backing projects with cultural merit.
• Crypto Dispute Resolution: The Israel Bar Association provides mediation services for conflicts involving cryptocurrencies, an exclusive service for crypto-investors and corporations.
• Cybersecurity Standards: The Israel National Cyber Directorate sets regulations for protecting crypto wallets that are critical to Israel’s tech-focused economy.

Conclusion

Israel applies a strong legal structure to the cryptocurrency market – see the table of basic laws – focusing on AML/CTF (Anti-money Laundering/Counter-Terrorism Financing) compliance, tax and securities law. DeFi and NFTs, innovative though they may be, are subject to regulatory uncertainty, presenting opportunities and challenges. Local exchanges, such as Bits of Gold, as well as international ones, like Binance, enable trading between the shekel and bitcoin. Payment can be made by bank transfer or at a crypto ATM. Israel’s innovative endeavors, like its CBDC projects, academic DeFi study and cultural NFT initiatives support its broader crypto ecosystem. And here, too, the customized resources list offers the tools to help law firms navigate this terrain. With recent licensing and impending tax breaks for overseas investors, the country is maintaining its ambition to facilitate blockchain innovation all the while ensuring the requisite controls in place—as one of the Middle East’s leading digital currency markets.