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Israel’s nascent digital-asset sector is pressing for regulatory clarity and a more supportive footing for innovation. At a Tel Aviv gathering in early February, the Israeli Crypto Blockchain & Web 3.0 Companies Forum unveiled a lobbying drive aimed at reshaping the regulatory regime for stablecoins, tokenization, and tax treatment of tokenized assets. The push is anchored by research from KPMG, which the organizers say could add about 120 billion shekels ($38.36 billion) to the economy by 2035 and help create roughly 70,000 jobs. With policymakers signaling that 2026 could be a turning point for the local crypto scene in the wake of a US-brokered Gaza ceasefire, advocates argue a more permissive framework would unlock a wave of investment and innovation while delivering clearer compliance pathways for businesses.

Key takeaways

• The Forum’s agenda centers on easing rules around stablecoins and the tokenization of assets, alongside simplifying tax compliance for digital assets.
• KPMG’s research, cited by the organizers, projects a potential economic boost of 120 billion shekels by 2035 and the creation of about 70,000 jobs if reforms materialize.
• Public engagement on crypto is already solid in Israel, with estimates suggesting more than 25% of the population having crypto dealings in the last five years and over 20% currently holding digital assets.
• Banking frictions persist, with local financial institutions reportedly cautious about crypto clients and due diligence processes that can slow even legitimate funding.
• A national strategy framework endorsed by lawmakers and government agencies envisions a unified regulator, clear token issuance rules, and closer banking integration as core pillars.
• Broader market context shows steady growth in Israel’s crypto economy, influenced by regional dynamics and post-crisis policy shifts in the wider Middle East.

Sentiment: Neutral

Market context: The push aligns with a broader push in the region toward regulatory clarity for digital assets, as policymakers weigh the balance between innovation and consumer protection. The discussion follows a period of heightened activity in the global crypto space, with regulatory developments and institutional engagement shaping investment flows and product development.

Why it matters

The Israeli Forum’s lobbying effort spotlights a longer arc of policy maturation for digital assets in a country often cited for its deep fintech ecosystem. If the proposed reforms—ranging from tax treatment to token issuance and stablecoin regulation—are enacted, the immediate effect could be a more predictable operating environment for startups and fintechs that already anchor their research and development in Tel Aviv and surrounding hubs. Fireblocks and Starkware, two prominent players in the local crypto ecosystem, figure among the Forum’s sponsors, underscoring the scale of institutional interest in Israel’s ability to convert regulatory clarity into competitive advantage.

Underlying the push is a data-backed argument about public sentiment and ownership. A substantial share of Israelis have engaged with crypto: more than a quarter of the population has interacted with crypto markets in the last five years, and a significant portion remains actively invested in digital assets. Proponents contend that a clearer framework would lower compliance costs, reduce friction with banks, and attract both domestic and international capital. This is not just about niche tech; it is about turning Israel’s fintech strengths into a robust, globally integrated digital assets sector that can attract venture funding and talent while providing tax and regulatory certainty for participants.

On the policy front, the conversation sits within a broader national strategy. In mid-year, Israel’s National Crypto Strategy Committee presented an interim report to the Knesset, outlining a five-pillar framework that envisions a unified regulator, concrete rules for token issuance, and banking integration as central elements. The Government’s stance toward crypto taxation also evolved in August with the Tax Authority introducing a voluntary disclosure procedure intended to offer a path for taxpayers to come forward with previously undisclosed digital-asset income and assets, in exchange for immunity from criminal proceedings. Officials have acknowledged, however, that participation has fallen short of expectations, even as authorities pledged to push the program through to the end of August 2026. The Tax Authority’s leadership has stressed that the banking sector, which remains wary of cryptocurrency, contributes to the broader challenge of converting voluntary disclosures into practical liquidity for participants.

Beyond national borders, the story intersects with global peers pursuing tokenization and DLT pilots. A related body of work highlights how European pilots and U.S. momentum are shaping the international environment for token-based finance and on-chain markets. While Israel charts its own course, the regional and global context provides a backdrop for what the country is attempting to achieve: a stable, scalable environment in which digital assets can grow responsibly while delivering tangible economic benefits.

The broader narrative also reflects a bifurcated reality in which innovation and risk management must advance together. On one hand, the sector seeks predictable tax rules, a clear regulatory sandbox, and simpler compliance regimes. On the other hand, regulators are tasked with safeguarding consumers and preserving financial stability in the face of rapid innovation. The balance Israel pursues will influence not only domestic growth but its standing as a hub for crypto engineering, tokenized financial services, and cross-border collaboration in a global market that has become increasingly sensitive to regulatory signals.

What to watch next

• Parliamentary review and potential amendments to the National Crypto Strategy Committee’s interim framework, including expected legislative steps in 2026.
• Formalization of token issuance rules and a roadmap for banking integration within Israel’s financial system.
• Updates to the Voluntary Disclosure Procedure, including participation metrics and the timeline for broader outreach beyond August 2026.
• Regulatory guidance on stablecoins and tokenized assets that clarifies custody, settlement, and consumer protection standards.

Sources & verification

• Israeli Forum event materials and statements from Nir Hirshman-Rub, February Tel Aviv gathering.
• KPMG research cited by the Forum outlining potential economic impact from regulatory reforms.
• Chainalysis report on the Middle East and North Africa crypto adoption and Israel’s crypto economy trajectory.
• Startup Nation Central data on Israel’s fintech and digital-asset startups, funding, and employment.
• Israel Tax Authority Voluntary Disclosure Procedure page and related coverage in Globes on participation levels.
• National Crypto Strategy Committee interim report to the Knesset and related policy discussions.
• Post-conflict policy references and industry commentary on the Gaza ceasefire and its regulatory implications.

Israel’s regulatory push could redefine the digital asset landscape

Israel’s digital-asset sector stands at a crossroads where policy design could either accelerate growth or slow down momentum built in a vibrant fintech ecosystem. The Forum’s campaign to ease stablecoin and tokenization rules, coupled with streamlined tax treatment, frames a pragmatic path toward scaling innovation while maintaining appropriate guardrails. The numbers backing the push—120 billion shekels in potential economic impact by 2035 and roughly 70,000 new jobs—are meant to illustrate the scale of opportunity that could accompany a well-calibrated regulatory regime. They rest on a foundation provided by KPMG’s research, which the Forum cites as a basis for a policy package that would reduce ambiguity, lower compliance costs, and attract capital.

However, the journey from advocacy to enacted policy is mediated by a complex web of stakeholders. Banks, prosecutors, and tax authorities all play a role in shaping how crypto businesses operate in practice. The banking sector, in particular, has historically shown caution toward crypto-related clients, with due-diligence processes that can feel prohibitive for emerging firms. Executives note that such frictions, if not addressed through clear regulatory language and robust consumer protections, can impede the flow of funds needed to scale projects and attract international partners. The ongoing dialogue between policymakers and industry participants suggests a willingness to align incentives, but implementation remains contingent on legislative debate and regulatory clarity.

In this context, Israel’s broader strategy—especially the five-pillar framework proposed by the National Crypto Strategy Committee—reads as a blueprint for sustainable growth. A unified regulator, explicit token issuance guidelines, and a plan to integrate banking services with digital-asset activities could reduce fragmentation and build confidence among entrepreneurs and investors alike. Meanwhile, the voluntary disclosure program highlights the government’s intent to formalize a safe channel for asset reporting, even as participation metrics and enforcement timelines indicate that outreach and uptake will be critical in the months ahead. The interplay between domestic policy, corporate innovation, and international perception will shape whether Israel becomes a regional hub for tokenization and crypto engineering or a cautionary tale of regulatory churn.

In the near term, observers will watch for concrete policy moves and parliamentary momentum. The post-2026 regulatory environment will likely hinge on how quickly the nation can translate strategy into risk-managed products and services. The evolving stance on stablecoins, the mechanics of token issuance, and the practical cross-border implications of a unified regulator will all influence investment appetite and the pace of product development. As regional players and global incumbents refine their own regulatory playbooks, Israel’s path could serve as a useful case study in balancing innovation with oversight, and in translating theoretical economic gains into tangible benefits for citizens and businesses alike.

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