The Israeli government is very proactive in terms of supporting the crypto industry with various moves and investments. In October 2023, Crypto Aid Israel launched a multisig donation wallet in cryptocurrencies such as Bitcoin, Ethereum, Tether, and USD Coin. The above step is in collaboration with one of the bigger banks in Israel and other government agencies to ensure the proper functioning of donations.
In March 2023, the new digital and crypto tax policies approved by Israel have been geared towards controlling the environment. These include levies on digital businesses, reliefs on VAT for some foreign digital services, and a reduction of capital gains taxes accruing from the sale of digital currency by foreign residents. In addition, tax rates on crypto options of employees may be minimized to approximately 25%, with the current at 50%, to resonate with Israel's economic goals of attracting investors and businesses.
A well-structured and strong regulatory framework has been enforced to govern the cryptocurrency market of Israel. In January 2023, amendment proposals for the applicability of securities laws regarding digital assets were published by the Israel Security Authority. The intends will be to define security tokens as digital assets intended for investment in a specific venture—hence rendering certain regulatory obligations within the meaning of Israel's law.
In November 2023, the Israel Tax Authority announced these virtual currencies to be considered financial assets, resulting in classifying them under various taxes. Accordingly, each profit gained from the sale of a cryptocurrency will be subjected to a Capital Gain Tax, where, for individuals, such tax would be 25%, and for corporations, it would be 23%. As for Value-Added Tax, it only applies on commercial activity but does not apply in the case of personal use or investment; therefore, it shall not be charged on deposition. On the other hand, Israeli residents and corporations holding cryptocurrency will have the obligation to report their transactions and profits to the ITA.
In May 2022, the Israeli bank supervisor published Directive No. 411, which set guidelines and policies relating to assessing risks linked with the transfer of funds associated with digital assets. According to this directive, it is an obligation to have transparent procedures when conducting payment services in virtual currency, especially those directed from virtual currency service providers to bank accounts open in the name of clients.
In 2021, the Bank of Israel told banks that they should be allowed to receive deposits in digital currencies coming from firms that obtained a license in currency trading. With this regulation, digital currency investors could be able to convert their holdings from cryptocurrencies to bank accounts using approved trading platforms.
The oversight of the cryptocurrency market in Israel is under the Israeli Securities Authority, Israel Tax Authority, Decentralized Autonomous Organization, and Israel Money Laundering and Terror Financing Prohibition Authority.
There had been robust investments streaming in the country's cryptocurrency space. In February 2024, a leading blockchain PR and content marketing agency MarketAcross collaborated with HELLO Labs, a Web3 entertainment company, to help audiences learn about Web3 and serve them quality entertainment. By serving as HELLO Labs' official PR partner, MarketAcross could leverage all its experience and industry relations to bring the attention of numerous people to cryptocurrency-friendly content.
In April 2023, Twitter announced that it had entered into a partnership with the Israel-founded platform eToro, where users can trade stocks and cryptocurrencies in the Twitter app. The integration promises a unified investment platform due to this service being extended to users, who, for their part, will attain access to financial markets directly from the app. eToro gives its users an assorted base of assets for trading, and now, through this partnership, these assets will be available to Twitter users for detail viewing and trading.
In March 2022, Bank Leumi of Israel stated that it will start offering digital asset services to its retail customers. The Israeli bank will allow such activity via an investment application known as Pepper Invest. The idea of expanding the services is to minimize the increased demand for services in relation to cryptocurrencies. Bank Leumi, in collaboration with Paxos, a regulated blockchain infrastructure platform, has found the perfect ally.
Some of the key players in Israel providing a testament to the important position of this nation in the cryptocurrency market include DeepDao, EOSTARTER, Sepana, Collider Ventures, Vyntex, Porat, Titanium Blockchain, and MarketAcross. These companies are innovating and developing the cryptocurrency space and hence facilitating growth and advancement of the market in Israel.
The cryptocurrency market in Israel is characterized by proactive government initiatives, a strong regulatory framework, large investments, and key local industry players. With a supportive environment, Israel continues to be in the global center with innovations and changes in the cryptocurrency market.
The cryptocurrency market in Israel is expected to reach US$17 million in 2028 from US$10 million in 2023 at a CAGR of 10.68%. Cryptocurrencies enjoy high levels of acceptance and adoption across individuals and institutions in Israel. The trend is also catalyzed by increased awareness of the benefits that come with digital currencies, such as faster transaction times and lower fees.