On-shore VASP in Israel

ISA — Securities regulation, crypto oversight

CMISA — Financial Asset Service Provider licensing

Israel Money Laundering Prohibition Authority — AML/CFT compliance

Financial Asset Service Providers Regulation Law (2023) — FASP licensing covering crypto exchange, custody, portfolio management. Framework matured 2023-2024 after years of uncertainty.

VASP: Financial Asset Service Provider (FASP) License from ISA/CMISA. ILS 300,000-1,000,000 (~$80K-$270K USD) depending on activity type. 6-12 months. Banking sector gradually opening after landmark court cases and Bank of Israel guidance.

CUSTODY: Included under FASP license; customer asset segregation required

EXCHANGE: FASP license. Strong crypto startup ecosystem but banking access historically challenging.

Being an Israeli citizen/resident of legal age, legally competent, and not bankrupt (for individuals); or solvent for corporations.

No convictions for offenses unfit for financial handling.

Prepare documents: company registration, business plan, proof of capital, directors' details, compliance handbook, IT/security policies, risk models.

Submit to CMA (or relevant authority for VASPs/exchanges/custody).

Undergo verification/review (8-14 weeks, depending on completeness).

ISA proposed amendments to the Israeli Securities Law to categorize tokens (e.g., security vs. utility, using Howey-like tests) and regulate offerings, potentially impacting custody.

National Crypto Strategy Committee interim report proposes a unified regulator, token issuance rules, and banking integration; parliamentary review and 2026 legislative steps expected.

Regulatory guidance sought on stablecoins and tokenized assets, covering custody, settlement, and protections; Bank of Israel (BOI) principles for stablecoin risk management.

ISA committee evaluating decentralized offerings; ongoing stablecoin regulation likely under BOI.

Custody Providers: Need the same CMA financial asset service license for management or custody of virtual currencies; Israeli Trust Act provisions may also apply. Transactions must route through licensed entities in the "closed garden" model.

CMSA/ISA/BOI/IMPA oversight (no direct URLs).

Screening Obligations: VASPs must screen customers, counterparties, wallets, and transactions against these lists using integrated KYC, transaction monitoring, and blockchain analytics; OFAC may list specific crypto addresses on the SDN List, requiring blocking of associated assets.

Crypto Travel Rule Alignment: Under FATF standards adopted in Israel, VASPs comply with Travel Rule-like requirements for transfers, including counterparty sanctions verification; EU's Regulation (EU) 2023/1113 (MiCA-related) influences via cross-border operations, applying to all qualifying crypto transfers without thresholds since December 2024.

Travel Rule adopted — threshold: ILS 5,000

Evidence fact il.tax not found (may have been renamed).

Gains from selling, exchanging, or disposing of cryptocurrencies are taxed at 25% for individual investors, calculated as the difference between acquisition cost and sale proceeds (using fair market value at receipt for mining), subject to potential inflation adjustments per Israeli capital gains rules.

For individuals holding as investments: Capital gains tax at 25%.

For business activities (frequent trading, mining): Taxed as ordinary income at marginal rates up to 53%, with mining income includible at fair market value on receipt date.

Miners or traders: Classified as "dealers," liable for 17% VAT on transactions; business traders as "financial institutions" face additional 17% profit tax and cannot reclaim input VAT.

Individuals: Report gains/losses on annual tax returns with transaction records (dates, amounts, fair market values) for audit verification; failure to report is a criminal offense. [9 from 2]