Israel crypto industry seeks reforms amid broad public support
The Israeli Crypto Blockchain & Web 3.0 Companies Forum has launched a lobbying initiative to advance digital asset regulatory reforms that KPMG estimates could add 120 billion shekels ($38.36 billion) to the economy by 2035 and generate 70,000 jobs.
At a Feb. 3 event in Tel Aviv, Forum leader Nir Hirshman-Rub said there is broad public backing for legislation to ease rules on stablecoins and tokenization and to streamline tax compliance requirements.
Following the U.S.-brokered Gaza ceasefire, Hirshman-Rub described 2026 as a “defining year” for Israel’s digital asset sector. Citing KPMG research, he noted that more than 25% of the public engaged with crypto in the past five years, and more than 20% currently hold digital assets.
Impact of the Oct. 7, 2023 attacks on Israel’s crypto ecosystem. Source: Chainalysis.
Steady growth as digital asset landscape evolves
An October Chainalysis report found that Israel’s crypto economy continued to expand, with inflows topping $713 billion last year. The report highlighted a sharp rise in volumes following the October 2023 Hamas attacks, supported by strong retail activity.
Israeli companies including Fireblocks and Starkware hold leading positions globally and are among the Forum’s sponsors. According to NGO Startup Nation Central, more than 160 locally founded companies have attracted over 5% of the $30 billion invested worldwide in the sector, collectively employing more than 2,500 people, primarily in the greater Tel Aviv area.
Blockchain and digital asset startups account for a significant share of Israel’s fintech sector. Source: Startup Nation Central.
Hirshman-Rub said that once companies disclose digital asset activity, Israeli banks often decline service or require legal assurances that funds originating from digital assets will not be deposited domestically, resulting in extended due diligence processes and operational delays.
Among other barriers the group seeks to address is an income tax ordinance that treats token distributions to employees less favorably than stock options. While traditional stock options are taxed at 25%, tokenized options are taxed at 50% for comparable value.
A national strategy
In July, the National Crypto Strategy Committee presented an interim report to the Knesset outlining a framework built on five pillars, including establishing a unified regulator, setting rules for token issuance, and enabling banking integration.
In August, the Israel Tax Authority introduced a new Voluntary Disclosure Procedure offering taxpayers a pathway to report previously unreported income and assets, including digital assets, in exchange for immunity from criminal proceedings. It is the agency’s third attempt to implement such a program.
Last month, the authority said participation has been below expectations but affirmed that the initiative will remain in place through the end of August 2026.
Tax Authority director Shay Aharonovich said, according to local media reports, that Israeli banks are largely unwilling to accept cryptocurrency and that bringing in proceeds from crypto sales is difficult. He added that this deters voluntary disclosure, as taxpayers aim not only to pay taxes but also to access and use their funds.
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