Self-custodial wallet / non-custodial software in Israel
Publisher of software where users hold their own private keys. The publisher never holds, controls, or has access to user funds.
Self-custodial wallet is permitted in Israel with no licensing burden.
Verdict Details
- Permitted
- yes
- Local entity required
- No
- Licensing burden
- None
- Last updated
- 2026-07-13
AML Obligations
- No AML obligations attach to the software publisher itself because it never holds, controls, or has access to user funds — the publisher is not a Financial Asset Service Provider (FASP) under the Financial Asset Service Providers Regulation Law (2023).
- AML/CTF obligations under Israel's AML laws (supervised by the Israel Money Laundering Prohibition Authority) would only attach if the publisher were classified as a VASP/FASP — which does not occur for pure non-custodial software.
- Users operating the wallet autonomously may have their own obligations, but the publisher has no screening, KYC, or Travel Rule duties.
Key Restrictions
- The publisher must not hold, control, or have access to user private keys or funds — any custodial element would trigger FASP licensing under the Financial Asset Service Providers Regulation Law (2023).
- The software must not offer exchange, custody, or portfolio management services; those activities require a FASP license from the ISA/CMISA.
- No consumer-protection or disclosure-specific rules were identified for non-custodial wallet software under Israeli law; however, general consumer protection laws may apply.
Key Risks
- Regulatory ambiguity: The FASP framework (2023) is still maturing, and ISA/CMISA has not issued explicit guidance confirming that pure non-custodial wallet software publishing is outside the FASP definition — enforcement action remains a tail risk.
- Banking access: Even though the publisher itself may not be a FASP, if the software facilitates on-ramps/off-ramps to Israeli bank accounts, banking partners may apply their own compliance requirements.
- Stablecoin and DeFi regulatory developments (National Crypto Strategy Committee, BOI principles) could expand definitions in ways that catch non-custodial software under future rules — 2026 legislative steps are expected.
Evidence
This verdict synthesizes the following facts. Each fact links to its primary source(s).
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
Verdict Attribution
- Source:
- AI-Generated · Unreviewed
- AI synthesized:
- 2026-07-13 (deepseek-chat)
- Last updated:
- 2026-07-13
- Confidence:
- medium
This verdict was produced by an AI model from the underlying facts. Confirm with counsel before relying on it for material decisions.
Yes — pure non-custodial wallet software publishing does not trigger FASP/VASP classification or AML obligations under Israeli law, as the publisher never holds or controls user funds, but the framework is still maturing and no explicit safe harbor has been published.
Questions this verdict aims to answer
- Does software publishing trigger VASP / MSB classification?
- Do AML obligations attach when no custody exists?
- What disclosure or consumer-protection rules apply?