Israel -- Custody Regulations Regulatory Overview

In Israel, cryptocurrency custody is regulated under the Supervision of Financial Services (Regulated Financial Services) Law 5776-2016, which classifies virtual currencies as "financial assets," requiring providers to obtain a license from the Israel Capital Market, Insurance and Savings Authority (CMSA, also known as CMA).[1][2][3][4][5]

Custodial License Requirements

Providers of crypto custody or management services must secure a "service provided in a financial asset" license from the CMSA, which supervises operations and enforces consumer protections.[1][2][3][4][5]
Eligibility criteria include:

• Being an Israeli citizen/resident of legal age, legally competent, and not bankrupt (for individuals); or solvent for corporations.
• Maintaining minimum equity capital.
• No convictions for offenses unfit for financial handling.[4]
  The Israeli Securities Authority (ISA) approved amendments in August 2024 allowing Tel Aviv Stock Exchange (TASE) non-bank members (e.g., brokerages) to offer custody for approved cryptocurrencies like Bitcoin and Ethereum via licensed providers, under a "closed garden" model.[3]

Segregation of Client Assets Rules

Search results do not explicitly detail segregation rules for client assets in crypto custody. The Supervision of Financial Services Law introduces general consumer protections and security measures for financial asset services, and provisions of the Israeli Trust Act may apply to custodians.[1][5] No specific mandates on asset separation are outlined.

Insurance/Bonding Requirements

No explicit insurance or bonding requirements for crypto custodians are mentioned in available sources. Licensing under the Supervision Law implies oversight for financial stability, but details are absent.[1][2][4][5]

Cold Storage Mandates

Search results provide no specific mandates for cold storage in Israeli crypto custody regulations.[1][2][3][4][5]

Qualified Custodian Definitions

No formal definition of qualified custodians appears in the results. Licensed entities under CMSA supervision for financial asset services (including virtual currencies) function as custodians, potentially including TASE members post-2024 amendments.[1][3][4]

Pending Custody Legislation

• ISA proposed amendments to the Israeli Securities Law to categorize tokens (e.g., security vs. utility, using Howey-like tests) and regulate offerings, potentially impacting custody.[3]
• National Crypto Strategy Committee interim report proposes a unified regulator, token issuance rules, and banking integration; parliamentary review and 2026 legislative steps expected.[6]
• Regulatory guidance sought on stablecoins and tokenized assets, covering custody, settlement, and protections; Bank of Israel (BOI) principles for stablecoin risk management.[5][6]
• ISA committee evaluating decentralized offerings; ongoing stablecoin regulation likely under BOI.[5]
  As of 2026, no comprehensive crypto law exists; regulation integrates via existing frameworks.[3]

Regulatory References

• Supervision of Financial Services (Regulated Financial Services) Law 5776-2016: Core law for licensing (no direct URL; referenced across sources).[1][2][3][4][5]
• CMSA/ISA/BOI/IMPA oversight (no direct URLs).[2][3][5]
  Note: Specific legislation texts unavailable in results; consult official gazettes or regulators for full documents. Developments post-2024 (e.g., TASE custody rollout) may have progressed by 2026.[3][6]