ByDOR OFFIR

JULY 22, 2026 16:20

Israel's Capital Market, Insurance and Savings Authority released fresh mandatory directives that will markedly strengthen oversight of the nation's digital asset industry, obliging licensed crypto firms to adopt tougher compliance standards inside six months.

The overhaul ranks among the most substantial steps taken in Israel's crypto field so far and seeks to bolster safeguards for client funds, lower exposure to cyber threats, operational breakdowns and firm failures, while aligning the local market with global regulatory benchmarks.

The announcement follows the Bank of Israel's release last week of a draft directive intended to simplify the placement of crypto-linked funds into the banking system. Under the central bank's plan, assets stemming from crypto operations routed via a licensed Capital Market Authority entity would be viewed as lower risk, potentially easing deposits at Israeli banks.

A key adjustment concerns minimum equity levels. Firms offering crypto services without custody duties must hold equity of no less than NIS 2 million. Entities that also deliver custody services face a higher bar of NIS 2.5 million.

Custody providers must further maintain extra capital equal to 0.25 percent of the aggregate value of assets under custody. Capital needs will scale upward as business volume grows.

Equity capital may not be placed in digital currencies and must instead reside in cash, bank deposits or short-term government bonds to guarantee ready liquidity during emergencies.

Complete separation of client holdings

The framework introduces detailed rules on custody for the first time. Firms must keep client assets fully apart from their own and cannot deploy those holdings for unrelated purposes.

Assets will sit in segregated accounts so that, even during insolvency, company creditors cannot access them.

Digital wallet operations will face stricter controls. Transfers of digital currencies, especially between hot and cold wallets, will need sign-off from multiple authorized officers and must use multi-signature setups plus advanced security tools.

Every firm must keep daily logs of client assets, offer a personal dashboard for real-time viewing of holdings and guarantee withdrawals within a reasonable timeframe even amid system strain or cyberattacks.

Internal oversight will be reinforced. Each company must name a dedicated officer, independent of the board, to protect client assets and perform routine checks.

Custody providers will also undergo quarterly reviews by an independent external accountant.

Use of overseas custodians is permitted only when those providers operate under recognized oversight such as the UK FCA or the EU MiCA regime.

Even then, the Israeli firm retains full responsibility, must monitor assets daily and must disclose the custodian's identity and governing legal framework to clients.

Wider regulatory progress

The changes form part of ongoing regulatory efforts by Israeli bodies. Alongside the Bank of Israel's draft, the government is advancing legislation to govern stablecoins and expand the Capital Market Authority's supervisory reach in that area.

For investors the updates mean stronger safeguards for assets held by regulated platforms. Asset separation, capital rules, security protocols and fresh oversight steps aim to curb risks such as platform failures or asset losses seen in global crypto markets recently.

At the same time the new standards will raise operating expenses for firms and raise entry barriers for newcomers.

The Capital Market Authority maintains that over the longer term these steps are essential to build public trust, foster a safer regulated crypto environment and bring Israel in line with leading international practices.