Israel has been in the spotlight recently with the political controversies involving its leader, Benjamin Netanyahu. For many people who only have a little knowledge about this state, it could seem that Israel is not really a very popular place to do crypto business.

Despite the difficulties, the Israeli economy has seen exponential growth in the past decades. This progress was also strong in the field of IT and technology. Israel is becoming one of the most important technological hubs in the Middle East. This might mean that soon it might become a crypto hub, too. Anyway, let’s see how this country treats cryptocurrencies and their owners.

Is crypto legal in Israel?

Israeli residents do nothing illegal if they engage in the activity of investing in or trading with cryptocurrencies. Here’s a list of the recent regulations and updates concerning crypto in the country:

Despite this friendly approach, in 2014 the Bank of Israel issued an official statement warning investors about the risks of cryptocurrencies
In 2018 it posted another statement saying that it will not recognize crypto as actual currencies, only as financial assets. The reason for this decision was explained by the fact that there exists a genuine challenge in providing comprehensive directives to the system regarding the suitable approach for assessing, handling, and overseeing the inherent risks associated with crypto. In addition to the risks faced by the customer, the bank also faces compliance related risks.
The ISA made an announcement in January 2021, saying that the categorization of crypto tokens would be treated as securities instead of assets. This decision was influenced by the belief that the token's value is anticipated to rise, a typical feature associated with investments in securities. However, it is important to note that this classification does not apply to traded cryptocurrencies, as they are still regarded as assets.
In January 2023, Israel's financial regulator proposed incorporating cryptocurrencies into the country's current securities regulations. This move will result in direct regulatory oversight of BTC and other alternative digital currencies. Additionally, the asset class will be placed within the "financial instruments" category, alongside securities, marketing, and joint investments.

Crypto taxes in Israel

Although crypto is not recognized as currencies in Israel, transactions made via crypto may be considered virtual payments and be subject to VAT, a value-added tax. However, the applicable laws might also differ depending on the cryptocurrency itself. Coins that have their own blockchain are generally viewed differently from tokens that do not run on their own blockchain.

As an example, this can include a lot of tokens that run on the Ethereum blockchain. It is worth being well aware of this difference, although the terms “cryptocurrency” and “token” are often not entirely correctly used as synonyms during the general discussion. Depending on what digital currency you are actually holding it might be taxed as a financial asset or as a financial security.

Statistics for Israel

Cryptocurrencies are becoming more popular amongst the local population. According to the research of Gemini made in 2022, 28% of Israelis reported owning any type of crypto. Israel is a little behind the UAE, where 38% of the population has bought cryptocurrencies. All in all, Israel takes the fifth place by cryptocurrency ownership in the Gimini’s research doc.

What’s also interesting is that more than a half (51%) of the Israeli respondents who own crypto are female:

Talking about concerns of Israeli people, they highlighted the reasons for not buying cryptocurrencies. Their answers were recorded in the Middle East section, which is shared by Israeli and UAE residents.

These results mean that the respondents either have trust issues with crypto or do not know how to buy or/and use the assets.

Fast facts

Israeli IT firms are becoming increasingly interested in forms of crypto technology, such as blockchain technology and smart contracts. Various startups from Israel — Chain Reaction ($115 million), Ironblocks ($7 million), Chaos Labs ($20 million) and some others — have raised huge funding.
Israel is home to several cryptocurrency exchanges, including Bit2C, which appears to be founded in 2013.
In 2022, Israel’s Bank Leumi became the first traditional bank in the country to allow customers to trade cryptocurrencies such as BTC and ETH.
There are 9 working Bitcoin ATMs now in Israel, according to coinatmradar:

Conclusion

The importance of Israeli companies on the global stage in the field of crypto might be going to increase in the future. The country already has numerous well-established startups raising millions of dollars.

This makes it more possible that Israel will become an important crypto hub. The relatively clear and friendly local crypto regulations also do not pose some insurmountable obstacles to this. However, the regulators still have a lot of work to do. SimpleSwap will monitor the information concerning crypto in this region and keep you updated on the big news.

If you would like to know more about crypto regulation in other countries, make sure to check out our previous articles dedicated to Spain, Ireland, the UK, Indonesia, Argentina, Turkey, Iceland and Canada.

SimpleSwap reminds you that this article is provided for informational purposes only and does not provide investment advice. All purchases and cryptocurrency investments are your own responsibility.

Don’t miss our new articles!

Share on: