From Dogecoin to Bitcoin: Israel prepares its first crypto asset rulebook
The regulator aims to separate established digital assets from speculative tokens as it moves to bring the crypto industry under clearer supervision.
The Capital Market Authority published earlier this week a new draft circular for public comment that defines, for the first time, which virtual currencies Israeli crypto companies will be permitted to offer their customers.
For the general public, the digital currency market is mainly associated with familiar names such as Bitcoin and Ethereum. In reality, however, more than 13,000 virtual currencies are traded worldwide. Alongside established assets, the market includes smaller currencies, including meme coins inspired by internet jokes such as Dogecoin, as well as digital assets whose liquidity, ownership structure or underlying legitimacy are not always clear.
Until now, decisions regarding which currencies Israeli crypto companies could offer customers were largely left to the companies’ commercial discretion. The new circular seeks to establish uniform regulatory boundaries and create a standardized framework for approving digital assets.
The move is part of a broader effort by the Capital Market Authority to institutionalize Israel’s crypto industry. While the equity trading and custody circulars published by the regulator last week focused on companies’ financial stability and wallet security requirements, the new registration circular addresses the digital assets themselves.
Under the proposed rules, virtual currencies offered to the Israeli public would need to meet several threshold requirements. A digital asset would need to have a market capitalization of at least $500 million and rank among the 50 largest cryptocurrencies globally for six consecutive months.
In addition, the asset would need to demonstrate international recognition by being available for trading through at least five regulated entities in either the European Union or the state of New York.
To reduce risks of fraud and market manipulation, the regulator is also introducing a decentralization requirement.
Under the proposed framework, currencies would not be eligible for offering in Israel if a single entity controls more than 15% of the total circulating supply, or if the 10 largest holders collectively own more than half of all outstanding tokens.
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The draft also excludes assets that provide complete anonymity and make it difficult to trace transactions, as well as NFT-based assets, unique digital tokens representing ownership of items such as artwork or collectibles, which are not considered standard tradable currencies.
At the same time, the circular creates a more flexible framework for stablecoins, digital currencies whose value is linked to an underlying asset, such as the dollar or shekel.
About a month ago, the Capital Market Authority published a legal memorandum aimed at regulating stablecoin issuance in Israel. Stablecoins, which are typically designed to maintain a 1:1 value ratio with fiat currencies, have become a major area of growth globally, with monthly transaction volumes estimated at approximately $2 trillion.
Their appeal comes from the ability to facilitate fast, low-cost and programmable money transfers.
Under the proposed rules, a stablecoin issued in Israel under local regulation and supervision would be exempt from the market capitalization and international trading requirements imposed on other digital assets. The regulator said the goal is to encourage supervised stablecoin activity in the local market.
The proposed framework would also place new operational obligations on licensed crypto companies.
Boards of directors would be required to review and approve internal asset-listing policies annually. Any addition of a new cryptocurrency would require an assessment by the company’s risk and cybersecurity officer, as well as advance notification to the Capital Market Authority 60 days before launch.
The regulator would retain the authority to object to the listing of a digital asset if it determines that the risks are unreasonable.
Companies would also be required to conduct quarterly monitoring of listed assets. If a currency no longer meets the regulatory criteria, it would need to be removed from purchase options within three days. Customers holding the asset would receive 30 days’ prior notice to sell or transfer their holdings.
The proposed rules reflect the regulator’s attempt to balance investor protection with the commercial needs of crypto companies. In practice, the framework is likely to reduce the number of digital assets available for trading in Israel, particularly newer and more speculative currencies.
For investors, however, the regulator argues that the changes will create a filtering mechanism that focuses local trading on assets with greater liquidity, decentralization and international recognition.
