“Israel is significantly behind schedule”: Crypto industry calls for sweeping regulatory reform
Crypto Companies Forum CEO Nir Hirschmann Rub says Israel risks losing companies, talent and billions of shekels in economic activity unless it adopts comprehensive digital-asset legislation.
Israel’s crypto industry is at a crossroads. While the United States is moving to provide clearer rules for digital assets, Israeli companies still face regulatory, banking and tax barriers that are pushing entrepreneurs and talent abroad. Nir Hirschmann, CEO of the Crypto Companies Forum, argues that Israel risks losing a fast-growing industry unless it moves quickly to close the gap.
In recent months we have seen a regulatory blitz by the Capital Market, Insurance and Savings Authority and the Bank of Israel to advance regulation of the industry. Are we in a good place?
“The steps are welcome, but Israel is significantly behind schedule. In the US, regulators openly say that their policy goal is to provide regulatory certainty and bring entrepreneurs back to the country. They have connected licensed crypto exchanges to the federal clearing system, exempted self-managed wallets from broker regulation and enacted legislation allowing companies to buy US government bonds.
“In Israel, crypto companies still face difficulties opening bank accounts and receiving funds. In taxation, employees can face double taxation on options, while foreign investors are exposed to the risk of double taxation. As a result, Israeli entrepreneurs are establishing successful companies abroad. When the US offers a stable business environment and clear regulation, entrepreneurs prefer to operate there.”
What is the impact of this gap on the Israeli economy?
“We commissioned a research model from KPMG, and the findings were unequivocal: Removing regulatory barriers could generate an additional NIS 110-120 billion in GDP over a decade and create 70,000 jobs. Continuing under the current system would cost the economy NIS 50-90 billion in GDP and limit the industry to 4,000-5,000 employees.
“Unlike the AI industry, which requires enormous investments in infrastructure, electricity and data centers, growth in crypto requires mainly policy decisions and the removal of barriers.”
So what should the government do?
“A package of legislation is needed as part of the upcoming Arrangements Law, a comprehensive crypto reform for Israel. The government already decided in 2023 that a Digital Assets Law and a Stablecoins Law were necessary, but the legislative process has stalled.
“The bills that already have broad agreement should be consolidated, included in the Arrangements Law and completed within the first 100 days of the next government.
“Between 2023 and 2024, the number of crypto companies operating in Israel declined by 5%, and we are witnessing an ongoing migration of programmers and technology leaders abroad. Without comprehensive reform in the upcoming Arrangements Law, the local industry will simply empty out.”
How do you view the Bank of Israel’s project to promote a digital shekel, or CBDC, a digital version of the shekel issued and supervised by the central bank?
“The digital shekel project carries serious structural risks. It would be a situation in which the central bank directly issues and manages a digital currency. The state would gain direct and unprecedented control over citizens’ balances and money movements, including the ability to limit or reverse transfers at the code level.
“In the US, legislation is currently being promoted that would prohibit the issuance of a federal digital dollar, based on the idea of preserving individual freedom and the understanding that a government product could suppress the private market.
“In addition, issuing a digital shekel could hurt the ability of private companies to offer stablecoins and restrict competition. China is currently the only country implementing a CBDC at full scale, with the stated objective of greater monitoring of citizens.
“In a country that advocates a free market, the appropriate solution is regulation and supervision of private stablecoins, rather than direct issuance by the central bank.”
This week there was a cyber incident at Bits of Gold, one of the leading companies in Israel’s crypto industry. It may have been a software glitch that could have affected any financial company, but it happened to a crypto company. Does this suggest the industry is not secure enough?
“If anything, the incident proves the opposite. Although Bits of Gold was affected by a glitch at another software company, its security mechanisms identified the problem in time, customer funds remained unharmed and the service was not interrupted.
“We live in an extremely challenging era for cybersecurity. A similar glitch at CrowdStrike recently disrupted airports around the world. Is that a reason not to fly?
“The reality is that this is an opportunity for Israeli crypto companies. Israeli companies are among the world's strongest in developing security mechanisms for the industry, and that expertise can help them grow and develop while allowing citizens to receive more advanced services.”
We tend to use terms such as crypto, blockchain and Bitcoin interchangeably. Give us a quick introductory lesson.
“It all started with Bitcoin. Until 2009, transferring monetary value generally required a face-to-face exchange of cash or reliance on a third-party intermediary such as a bank.
“The banking system is well established and regulated, but it is also vulnerable to failures. Bitcoin was born in response to the global financial crisis of 2008 and offered a two-pronged approach: a potential solution to inflation through a fixed maximum supply of 21 million coins, and a public infrastructure and distributed ledger that enables the direct transfer of value between individuals without an intermediary.
“Blockchain is the name of the database and the technology that enables the registration and decentralized transfer of value.
“Later came Ethereum, which operates as a distributed computer and allows software code to run on the network, ‘programmed money.’ Its main application today is the issuance of tokens.
“From this application emerged what we call ‘crypto’: a broad term for digital assets, currencies and decentralized financial protocols based on cryptographic systems involving private and public keys.”
Another major concept is stablecoins, digital currencies designed to remain pegged to the value of a currency such as the dollar rather than fluctuate like Bitcoin. How do they work?
“This is the main killer application of the industry. A company issues digital currencies and holds an equivalent amount of liquid underlying assets against them, such as US government bonds.
“The regulator’s role is to ensure a full 1:1 backing ratio between the assets held in reserve and the tokens in circulation.
“The issuing company benefits from the return on the bonds, while the user gets access to a payment and settlement system that operates 24/7, with immediate execution and potentially very low fees.”
How does the crypto industry affect the average Israeli in everyday life?
“At the macro level, the industry is diversifying Israel’s high-tech sector, which has traditionally been concentrated in areas such as software and cybersecurity. It also creates jobs with high productivity and wages.
“At the micro level, 21% of Israelis currently hold digital currencies, while 27% hold or have held them in the past. About 1.5 million Israelis have therefore already been actively exposed to the field.”
A million and a half? Where are they?
“They are everywhere. Your photographer asked me about this. Israelis really love crypto. They buy it, hold it and understand the underlying concept, especially younger people.
“Ninety percent of the Israeli public is familiar with Bitcoin, and 38% of young people believe crypto reform could help ease the cost of living.”
So let’s return to the question of how crypto could make our lives better.
“The crypto industry presents a competitive alternative to the banking system. Bank profits in Israel reached NIS 32 billion in 2025, about NIS 10 billion of which came from fees. Crypto infrastructure can potentially reduce these costs significantly.
“Banking inefficiency is particularly noticeable when transferring money abroad. SWIFT does not actually transfer money; it transfers messages between banks containing payment instructions.
“If I am sitting, for example, at a Leumi branch in Petah Tikva and need to transfer money to Credit Suisse in Lucerne, the branch in Petah Tikva has to settle with the central branch, the central branch has to find a correspondent bank, and that bank has to settle with the correspondent bank of Credit Suisse. The process continues through the banking network until the money reaches the recipient.
“The process can take days, and each intermediary charges a fee. In crypto, you provide a wallet address and transfer the value directly. It can happen almost immediately and with finality. That creates a competitive engine that can reduce costs for the public.”
What other financial applications do you expect to emerge?
“Tokenization of assets. Just as a token can be backed by a dollar, tokens can be backed by shares in companies.
“The first advantage is continuous trading, 24 hours a day, seven days a week. The stock market closing at 5 p.m. is not a law of nature; it is partly a consequence of the need to synchronize different clearing systems at the end of the day.
“In token-based trading, ownership can be recorded immediately, potentially enabling real-time price discovery.
“The second advantage is access to markets. Tokenization could allow people around the world to purchase fractional ownership of assets directly.”
Where is the Israeli crypto market today?
“The last time we counted, there were 168 crypto companies operating in Israel, employing 3,346 people and having raised $4.2 billion since 2013, including $405 million in 2024 alone.
“The data shows that Israel has a tremendous talent pool that is building some of the infrastructure of the global crypto industry.”
Where did Israel’s comparative advantage in the field come from?
“The roots of the global industry are planted here. Because Israel did not have computers until relatively late, computer science developed along a highly theoretical path. We built major expertise in cryptography that produced generations of cryptographers and exceptional talent.
“Even some of the ideas on which Ethereum, the world's second-largest blockchain platform, was founded began taking shape in Tel Aviv.”
At the beginning of our conversation, you mentioned that you live in the southern Golan Heights but did not feel comfortable identifying your kibbutz. You said people in the industry are trying to maintain their privacy. Why?
“This is a necessary precaution. Holding a private key for a self-managed crypto wallet is equivalent to holding cash. In recent years, there have been cases around the world of violent extortion targeting digital-currency holders.
“In 2022, when the Tax Authority considered requiring the blanket registration of crypto holders, we presented it with data showing that a significant portion of disciplinary violations and convictions involving the Authority’s employees concerned abuse of privileges and unlawful access to databases.
“The Authority accepted our position and decided to shelve the initiative. In this area, maintaining discretion is a basic precaution.”
