Cryptocurrency Regulations and Laws in Israel
Discover Israel’s cryptocurrency regulations, including asset classification, 25% capital gains tax, ISA’s licensing for security tokens and stablecoins, and evolving crypto custody frameworks.
Israel takes a progressive yet cautious approach to cryptocurrencies—treating them as regulated assets, taxing gains, and introducing licensing pathways for digital-asset services, while exploring security-token and CBDC frameworks.
Summary
Cryptocurrencies are legal in Israel and classified as assets, not currency. The Israel Tax Authority (ITA) applies 25% capital gains tax, and the Israel Securities Authority (ISA) is working to bring security tokens and stablecoins under securities regulations. Licensing for crypto custody and trading services has expanded under ISA initiatives in 2023–2024.
Legal Status
- General Use: Legal; crypto holds asset status
- Trading: Legal and taxable; profits treated as capital gains
- Exchanges & Custody: Licensed under Financial Services Law; AML/KYC applies
- ICOs / Security Tokens: Becoming regulated under ISA proposals
- Stablecoins: Proposal to classify; implementation ongoing
- NFTs: Taxable and considered assets :contentReference[oaicite:5]{index=5}
Taxation
- Capital Gains Tax: 25% on crypto profits (up to ~30% depending on income)
- Income Tax: Proceeds from mining, business activity, or payments are taxed as regular income
- VAT: Crypto trading by investors is exempt; VAT applies to mining and business activity
- Reporting: Crypto-to-crypto exchanges are taxable events, and NFTs are reportable
Regulatory Bodies
- Israel Tax Authority (ITA): Defines crypto as assets and enforces tax rules
- Israel Securities Authority (ISA): Working on licensing for security tokens, stablecoins, and expanded custody/trading services
- Bank of Israel & Supervisor of Banks: Guiding banks on crypto interfaces and AML processes
- Capital Markets Authority: Licensing for crypto service providers under Financial Services Law
Key Regulations & Laws
- Circular 5/2018: Classifies crypto as assets; triggers capital gains tax
- Circulars 7/2018 & 91/2021: Clarify token types, crypto-to-crypto swap taxation, and VAT status
- ISA Proposals (2023): Introduce securities regulation for tokens and stablecoins
- 2024–2025 Legislation: Enables ISA-licensed crypto custody/trading in stock-exchange “Closed Garden” framework
- 2025 Withholding Tax Bill: Draft rules for digital asset transactions (25% individuals, 23% entities) effective July 2025
Timeline of Regulatory Milestones
| Year | Event | Description |
|---|---|---|
| 2018 | Circulars 5 & 7 | Asset classification & token taxation rules |
| 2021 | Circular 91 | Clarifies swaps & NFT taxation |
| 2023 | ISA proposals | Security-token and stablecoin regulation |
| 2024 | Closed Garden launch | Licensed custody via stock exchange members |
| 2025 | Withholding tax draft | Applied to digital asset trades |
Resources
- Israel Tax Authority – crypto guidance
- Israel Securities Authority – token and custody updates
- Bank of Israel – banking crypto interface frameworks
Notes
- Travel Tip: Crypto use is legal and taxed, but mainstream merchant acceptance is limited.
- Local Trends: Strong institutional adoption; Tel Aviv hosts a vibrant blockchain startup scene.
- Language: Official guidance available in Hebrew; summaries in English.