Israel’s crypto and Web3 industry is intensifying pressure on lawmakers to modernize digital asset regulations, arguing that reform could unlock tens of thousands of jobs and inject billions into the economy. According to research from KPMG, regulatory changes could add 120 billion shekels ($38.3 billion) to Israel’s GDP by 2035 and create roughly 70,000 new jobs.
At a February 3 event in Tel Aviv, leaders from the Israeli Crypto Blockchain & Web 3.0 Companies Forum formally launched a lobbying campaign aimed at easing restrictions around stablecoins, tokenization, and crypto taxation. Forum head Nir Hirshman-Rub described 2026 as a “defining year” for Israel’s digital asset economy, especially following the U.S.-brokered ceasefire in Gaza.
Citing KPMG data, he added that more than 25% of Israelis have interacted with crypto in the past five years, while over 20% currently hold digital assets-a level of adoption lawmakers can no longer ignore.
Crypto adoption accelerates despite regulatory drag
Israel’s crypto economy has continued to expand even as regulatory friction persists. An October report from Chainalysis showed that crypto inflows into Israel exceeded $713 billion last year, reflecting sustained retail participation following the October 2023 Hamas attacks. The data underscored how digital assets became a parallel financial channel during periods of heightened uncertainty.
Israeli-founded firms have also carved out influential positions globally. Infrastructure providers like Fireblocks and StarkWare are now pillars of the global crypto stack. According to Startup Nation Central, over 160 Israeli crypto companies have attracted more than 5% of global sector investment, employing thousands-mostly in the Tel Aviv region.
Yet despite this success, banking access remains a major bottleneck. Hirshman-Rub noted that once companies disclose crypto exposure, Israeli banks often delay or deny services, forcing firms into endless due-diligence loops.
Tax policy and banking barriers under scrutiny
Another flashpoint is taxation. Current rules treat token-based employee compensation far more harshly than traditional stock options. While equity options are taxed at 25%, tokenized incentives can face rates as high as 50%, discouraging startups from using crypto-native compensation models.
At the policy level, momentum is slowly building. In July, Israel’s Israeli Knesset reviewed an interim report from the National Crypto Strategy Committee, outlining plans for a unified regulator, clearer token issuance rules, and deeper banking integration. However, implementation has lagged.
Efforts to improve tax compliance have also struggled. The Israel Tax Authority launched a voluntary disclosure program allowing crypto holders to declare past gains without criminal penalties. But participation has fallen short. Tax Authority director Shay Aharonovich admitted the reluctance is tied to banking restrictions, saying people want not just to pay tax-but to actually use their money.
A crossroads moment for Israel’s crypto future
Industry leaders argue that without decisive reform, Israel risks losing talent and capital to friendlier jurisdictions. With public adoption already high and global competition intensifying, they say the question is no longer whether Israel should modernize crypto rules-but how fast it can act.
As Hirshman-Rub put it, the foundation is already there. What’s missing is regulatory follow-through.
