Israel moves to regulate stablecoins as finance ministry unveils new legal framework
Capital Market Authority to gain licensing and oversight powers over digital currency issuers.
The Ministry of Finance and the Capital Market Authority published on Monday for public comment a new legal memorandum aimed at regulating the issuance of stable digital currencies in Israel. Stablecoins are digital currencies pegged to a central currency at a 1:1 ratio, designed to provide price stability and avoid sharp fluctuations. However, they are issued by private entities rather than central banks.
The proposed framework will grant the Capital Market Authority licensing and supervisory powers over issuers of stable digital currencies. The move is intended to create a regulatory environment that protects the public while facilitating the integration of the crypto economy into the local financial system.
The regulatory initiative comes amid the rapid growth of the global stablecoin market, which has become a key driver in the digital asset sector in recent years. These currencies are widely used for fast cross-border transfers, online commerce, and financial innovation.
In practical terms, stablecoins enable instant money transfers to family members or suppliers abroad, at any time of day and with minimal fees, without the bureaucracy and delays associated with traditional banking systems. In online commerce, they offer a secure payment experience that protects consumers from exposing credit card details online, while reducing merchant processing fees. In addition, they support “smart money” functionality, programmable financial infrastructure that enables automated payments (for example, releasing funds to a seller only once a courier company confirms delivery of a package), all without the need for traditional financial intermediaries such as banks or credit companies.
Today, more than 200 different stablecoins operate worldwide, with a combined value estimated at over $300 billion. Monthly transaction volumes in the global market are estimated at approximately $2 trillion, with annual growth exceeding 40%. This global trend, used by hundreds of millions of users for trading, money transfers, and advanced financial applications, is expected to become an integral part of future financial infrastructure, and underscores the need for Israel to adapt its regulatory framework to the new economic reality.
The proposed regulation was formulated with the assistance of the Chief Economist’s Department and after extensive staff work that included consultation with the Bank of Israel. To adapt the framework to local conditions, professional bodies incorporated international standards, including the U.S. GENIUS Act and the European Union’s MiCA regulation. The current initiative builds on the Capital Market Authority’s existing licensing regime for digital financial services, under which nine licensees currently operate in Israel, five of which were approved since the beginning of this year.
The publication of the memorandum is intended primarily to allow the industry and the public to participate in shaping the final version of the law. In the coming weeks, the Capital Market Authority is expected to hold a series of roundtables and professional discussions with technology companies, fintech firms, representatives of the financial sector, and academic experts. The goal is to examine in depth the complex issues raised in the memorandum and ensure that the final regulatory framework is balanced and aligned with ongoing business and technological developments.
