On-shore VASP in Israel

ISA — Securities regulation, crypto oversight

CMISA — Financial Asset Service Provider licensing

Israel Money Laundering Prohibition Authority — AML/CFT compliance

Financial Asset Service Providers Regulation Law (2023) — FASP licensing covering crypto exchange, custody, portfolio management. Framework matured 2023-2024 after years of uncertainty.

VASP: Financial Asset Service Provider (FASP) License from ISA/CMISA. ILS 300,000-1,000,000 (~$80K-$270K USD) depending on activity type. 6-12 months. Banking sector gradually opening after landmark court cases and Bank of Israel guidance.

CUSTODY: Included under FASP license; customer asset segregation required

EXCHANGE: FASP license. Strong crypto startup ecosystem but banking access historically challenging.

Being an Israeli citizen/resident of legal age, legally competent, and not bankrupt (for individuals); or solvent for corporations.

No convictions for offenses unfit for financial handling.

Prepare documents: company registration, business plan, proof of capital, directors' details, compliance handbook, IT/security policies, risk models.

Submit to CMA (or relevant authority for VASPs/exchanges/custody).

Undergo verification/review (8-14 weeks, depending on completeness).

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.

National Crypto Strategy Committee interim report proposes a unified regulator, token issuance rules, and banking integration; parliamentary review and 2026 legislative steps expected.

Regulatory guidance sought on stablecoins and tokenized assets, covering custody, settlement, and protections; Bank of Israel (BOI) principles for stablecoin risk management.

ISA committee evaluating decentralized offerings; ongoing stablecoin regulation likely under BOI.

Custody Providers: Need the same CMA financial asset service license for management or custody of virtual currencies; Israeli Trust Act provisions may also apply. Transactions must route through licensed entities in the "closed garden" model.

CMSA/ISA/BOI/IMPA oversight (no direct URLs).

Screening Obligations: VASPs must screen customers, counterparties, wallets, and transactions against these lists using integrated KYC, transaction monitoring, and blockchain analytics; OFAC may list specific crypto addresses on the SDN List, requiring blocking of associated assets.

Crypto Travel Rule Alignment: Under FATF standards adopted in Israel, VASPs comply with Travel Rule-like requirements for transfers, including counterparty sanctions verification; EU's Regulation (EU) 2023/1113 (MiCA-related) influences via cross-border operations, applying to all qualifying crypto transfers without thresholds since December 2024.

Travel Rule adopted — threshold: ILS 5,000

Evidence fact il.tax not found (may have been renamed).

Gains from selling, exchanging, or disposing of cryptocurrencies are taxed at 25% for individual investors, calculated as the difference between acquisition cost and sale proceeds (using fair market value at receipt for mining).

For individuals holding as investments: Capital gains tax at 25%.

For business activities (frequent trading, mining): Taxed as ordinary income at marginal rates up to 53%, with mining income includible at fair market value on receipt date.

Miners or traders: Classified as "dealers," liable for 17% VAT on transactions; business traders as "financial institutions" face additional 17% profit tax and cannot reclaim input VAT.

Individuals: Report gains/losses on annual tax returns with transaction records (dates, amounts, fair market values) for audit verification; failure to report is a criminal offense. [9 from 2]