Israel’s crypto industry pushes for regulatory overhaul

Israel is at a pivotal moment in shaping its approach to cryptocurrency. The debate centres on whether the country can position itself as a true crypto nation, balancing technology, regulation, politics, and global competition. For Israel, already recognised for its strength in technology, the issue goes beyond digital coins, as reported by several media outlets. While other countries have advanced with clear strategies, Israel has been slower to act, and that delay carries risks as the global crypto race accelerates.

Landmark event at Knesset

The Israeli parliament recently hosted an event titled “A Crypto Strategy for Israel – A Growth Engine for the Israeli Economy”, where the final report from the National Committee for Crypto Strategy was presented after months of work and debate. The gathering brought together members of parliament, regulators, entrepreneurs, bankers, and industry leaders, highlighting the seriousness of the discussion. The report serves as a roadmap and carries a clear warning: Israel must act quickly or risk falling behind in the global crypto race.

Israel’s strong crypto foundations

With extensive knowledge of engineering, cryptography, and cybersecurity, Israel has a solid foundation for growing its crypto industry. The nation is clearly capable of innovation, but its regulations remain unclear. Tel Aviv could rapidly become a major centre for cryptocurrency activity with the help of supporting regulations, leveraging Israel’s current technological and research advantages.

According to the National Committee for Crypto Strategy, over the next ten years, the industry could boost Israel’s GDP by $120 billion. Such expansion would affect infrastructure, public spending, and the nation’s standing in the world economy. It might also encourage entrepreneurs to build domestically rather than abroad, help retain skilled workers, and generate thousands of new jobs.

Israeli crypto champions on global stage

Israel has already produced a number of globally recognized cryptocurrency companies. Leading companies in fields like enhancing blockchain scalability and safeguarding digital assets include Fireblocks and StarkWare. Collectively, nearly 160 cryptocurrency companies created in Israel account for more than 5% of global investment in the sector.

Uncertain laws have hindered Israel’s cryptocurrency development for years, making banks, investors, and founders reluctant to become involved. Some businesses have moved overseas as a result of this uncertainty, which has worsened the situation by displacing skilled workers. Regulation has struggled to keep up with rapid technological advances, resulting in an expensive gap that continues to affect the industry.

In 2024, there were 7.5 percent fewer active crypto firms in Israel, while the number of workers in the industry decreased by 12 percent. These declines draw attention to developing sector stability concerns and alert policymakers to the possibility of additional contraction if structural and regulatory issues are not resolved.

Chainalysis report insights

Crypto inflows totalled $713 billion after October 2023, according to a recent Chainalysis report, demonstrating the sector’s resilience. Despite broader challenges, everyday users continued their active participation, supporting the ecosystem. The study also notes that decentralised technologies often prove valuable in times of crisis, providing alternatives when established institutions are under strain.

Lawmaker support

There is rising support for advancing Israel’s crypto policy, as seen in recent Knesset debates. The committee’s chair, Arik Pinto, a former CEO of Bank Hapoalim, argued that granting regulatory clarity could enable Israel to take a leading position in the industry. Knesset member Oded Forer of Yisrael Beitenu said the committee’s recommendations should be included in coalition demands for the next government. Vladimir Beliak of Yesh Atid added that adopting the report is urgent if Israel wants to seize the opportunity.

What happens next

Israel has two options for determining its future in the cryptocurrency space. Rapid adoption may result in increased sector leadership, expansion, and global relevance. However, as more companies and personnel depart the nation, delays run the risk of wasted opportunities, diminishing its influence in the global economy. The longer rules lag behind technological advancement, the worse off Israel’s economy and innovation will be.