Stablecoin issuer / redeemer in Israel
Issues a fiat-pegged stablecoin to the public, operates redemption, and holds reserves backing the float.
Stablecoin issuer is conditionally permitted in Israel with a local entity, subject to AML obligations and high licensing burden.
Verdict Details
- Permitted
- conditional
- Local entity required
- Yes
- Licensing burden
- High
- Last updated
- 2026-07-13
AML Obligations
- FASP license holders must comply with IMPA AML/CFT rules including customer screening against sanctions lists (OFAC SDN, Israeli sanctions), counterparty/wallet/transaction screening using integrated KYC, transaction monitoring, and blockchain analytics
- Crypto Travel Rule alignment under FATF standards adopted in Israel — VASPs must verify counterparty sanctions compliance for transfers; EU's MiCA-related Regulation 2023/1113 influences cross-border operations
- Ongoing obligations include real-time monitoring of transactions and regular regulator engagement with CMA/ISA/IMPA
Key Restrictions
- Stablecoin issuer must obtain a Financial Asset Service Provider (FASP) license from ISA/CMISA — the regime is still maturing (2023-2024) and stablecoin-specific guidance is being developed by the Bank of Israel (BOI)
- FASP license capital requirement: ILS 300,000–1,000,000 (~$80K–$270K USD) depending on activity type; 6-12 month licensing timeline
- Local entity incorporation is required (Israeli company registration, directors' details, compliance handbook, IT/security policies, risk models)
- Customer asset segregation is required under FASP custody rules; Israeli Trust Act provisions may also apply for custodial activities
- Banking access has been historically challenging, though gradually opening after landmark court cases and Bank of Israel guidance
- Transactions must route through licensed entities in the 'closed garden' model operated by exchanges/custodians
- Stablecoin-specific regulation is still emerging — BOI principles for stablecoin risk management are under development; regulatory guidance has been sought on stablecoins and tokenized assets
- ISA proposed amendments to Securities Law may categorize stablecoins as securities under Howey-like tests, adding securities law compliance obligations
- Foreign-issued stablecoins (e.g. USDC, USDT) face regulatory uncertainty — no clear framework yet permits their use as means of payment; BOI may regulate stablecoins/payment tokens if they become a significant means of payment
Key Risks
- Uncertainty on whether a stablecoin constitutes a 'security' under ISA proposed amendments — could trigger full securities law compliance alongside FASP licensing
- Banking access remains a practical hurdle; many crypto firms historically unable to open bank accounts in Israel, though this is improving
- Stablecoin-specific regulation is not finalized — National Crypto Strategy Committee interim report proposes unified regulation but 2026 legislative steps are expected, creating regulatory ambiguity
- Tax treatment for stablecoin issuers operating as businesses: crypto gains taxed as ordinary income at marginal rates up to 53%, plus 17% VAT if classified as a 'dealer' or 'financial institution'
- Reserve composition, segregation, audit, and redemption-rights rules for stablecoins are not yet codified in Israeli law — significant compliance gap exists
- Cross-border stablecoin operations may trigger Israeli tax residency and withholding obligations
Evidence
This verdict synthesizes the following facts. Each fact links to its primary source(s).
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.
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.
Supervision of Financial Services (Regulated Financial Services) Law: Core licensing framework (no direct URL in results; see CMA site via ).
CMSA/ISA/BOI/IMPA oversight (no direct URLs).
Exchanges: Require a license as a "service provided in a financial asset" under the Supervision of Financial Services Law from the CMA. Recent ISA amendments (August 2024) allow non-bank Tel Aviv Stock Exchange (TASE) members (e.g., brokerages) to offer trading in approved cryptocurrencies like Bitcoin and Ethereum via licensed exchanges.
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.
Payment Processors: Not explicitly detailed for crypto; BOI may regulate stablecoins/payment tokens if they become significant means of payment, focusing on financial stability. General VASP activities fall under CMA/Financial Services Law.
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).
Receive decision; ongoing obligations include real-time monitoring and regulator engagement.
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.
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 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.
Verdict Attribution
- Source:
- AI-Generated · Unreviewed
- AI synthesized:
- 2026-07-13 (deepseek-chat)
- Last updated:
- 2026-07-13
- Confidence:
- medium
This verdict was produced by an AI model from the underlying facts. Confirm with counsel before relying on it for material decisions.
Conditional — a stablecoin issuer must obtain a FASP license from ISA/CMISA (ILS 300K–1M capital, 6-12 months), incorporate locally, and comply with IMPA AML/CFT rules, but stablecoin-specific regulation (reserve rules, redemption rights, classification as securities vs. payment tokens, foreign-coin permissibility) remains under development by the BOI and National Crypto Strategy Committee, creating significant regulatory uncertainty.
Questions this verdict aims to answer
- What e-money or banking license is required to issue?
- What reserve composition, segregation, and audit rules apply?
- What redemption rights must be granted to holders?
- Are foreign-issued stablecoins permitted for use locally?