On 29 June 2026, Israel’s Ministry of Finance and the Capital Market, Insurance and Savings Authority (the “Authority”) published a Legislative Memorandum for the Financial Services Supervision Law (Issuance of Stablecoins), 2026 (the “Memorandum”), marking the first attempt to establish a dedicated statutory framework for the issuance of stablecoins in Israel. The Memorandum follows the Authority’s April 2026 approval of BILS, a shekel-pegged stablecoin issued by Bits of Gold after a two-year regulatory pilot on the Solana blockchain.
Israel’s proposal arrives amid a broader global shift toward comprehensive stablecoin regulation. The European Union has implemented MiCA, while the United States has advanced the GENIUS Act. Against that backdrop, the Memorandum suggests that Israel increasingly views stablecoins not merely as crypto-assets, but as part of the country’s future financial infrastructure.
Viewed narrowly, the Memorandum establishes a licensing regime. Viewed more broadly, it reflects an important policy choice regarding the future of digital payments and settlement in Israel.
From Pilot to Primary Legislation
The Memorandum follows the Israeli government’s February 2023 decision to promote digital asset regulation and the Minister of Finance’s December 2024 decision assigning responsibility for stablecoin supervision to the Capital Market Authority. That allocation matters. It signals that Israel views stablecoins primarily as a supervised financial product, closer in spirit to payment instruments and insurance products than to securities.
Although the legislative process remains at an early stage, the Memorandum provides a clear indication of the Government’s intended regulatory approach. It also signals that market participants with Israeli exposure should begin assessing the proposed framework well before legislation is enacted.
Licensing and Who May Issue Stablecoins
Under the Memorandum, issuing a stablecoin in Israel without a dedicated license would be prohibited. Licensing and ongoing supervision would sit with the Commissioner of the Capital Market Authority, acting as the sector’s supervisor. Applicants would need to meet conditions on integrity and probity, financial stability, corporate governance and cyber infrastructure, and the Commissioner would have discretion to layer on further requirements, including capital adequacy, insurance, restrictions on permitted assets, and liquidity, calibrated to the scale and risk of the specific activity.
This is a familiar regulatory instinct in Israel: build a licensing gate, then supervise proportionally. What is new is applying it to an asset class that, until now, has operated almost entirely outside any dedicated Israeli licensing regime.
Reserve Backing and Redemption.
The substantive core of the Memorandum is reserve backing. Issued stablecoins would need to be backed at a rate of at least 100% by low-risk, highly liquid reserve assets, held separately from the issuer’s own balance sheet. The definition of “holder” of a stablecoin is drafted broadly. It is not limited to whoever bought the token from the issuer directly, but extends to anyone who ultimately holds it, including through a third party. That means the core protections – disclosure, redemption, and reserve safeguarding – travel with the token rather than staying with the original purchaser.
Redemption itself is framed as a fundamental right. Holders would be entitled to redeem at the value of the reference asset, with no redemption fees and no ability for the issuer to condition or limit redemption based on volume. And on the question that has generated the most debate internationally – whether stablecoin holders should earn yield – the Memorandum takes a clear position: no interest may be paid to holders, not directly, not via a third party. The intent is to keep the instrument a means of payment and a store of value, not a yield product competing with regulated deposits or securities.
Governance and Disclosure
Issuers would be required to run a real corporate governance structure: a board of at least three members, a CEO, an auditor, and a compliance officer, with the Supervisor empowered to set additional fitness requirements for officers.
On disclosure, an issuer could not offer a stablecoin to the public without first publishing a Hebrew disclosure document covering the backing mechanism, redemption policy, risks, and how reserves are safeguarded, updated whenever material information changes. Ongoing public reporting, on tokens in circulation and the value and composition of reserves, would also be mandatory, alongside prohibitions on misleading conduct and tying a stablecoin service to the purchase of unrelated services.
Foreign Issuers and Territorial Scope
Of particular importance for international issuers, the Memorandum would permit foreign entities already subject to effective supervision abroad to apply for an Israeli license, with the possibility of tailored exemptions. Although this is not equivalent to passporting under MiCA, it demonstrates an intention to recognize comparable foreign regulatory regimes where appropriate.
The Memorandum also adopts an expansive territorial approach. Where a foreign issuer directs activities toward Israeli residents, for example through Hebrew-language marketing, Israeli commercial relationships or other indicators of targeting, the proposed regime may apply irrespective of the issuer’s place of incorporation. Unlike MiCA, the Memorandum does not expressly recognize a reverse solicitation concept, suggesting that reliance on similar arguments may prove considerably more difficult under the proposed Israeli framework. A foreign issuer cannot rely on the fact that an Israeli holder came to it unprompted if the issuer is otherwise directing activity toward Israel, through Hebrew marketing, shekel-pegged products or local payment partnerships. In practice, this means the passive stance many foreign issuers take toward EU users, waiting for reverse solicitation rather than actively marketing, is unlikely to provide the same shelter in Israel. Foreign issuers that assumed a reverse solicitation-style argument would keep them outside Israeli jurisdiction should revisit that assumption now, before the bill is finalized rather than after an enforcement action tests it.
Conclusion
None of this is final, but the Memorandum clearly reflects a significant shift in Israeli regulatory policy. Rather than treating stablecoins solely as a crypto-asset issue, Israel is beginning to regulate them as part of its future financial infrastructure.
The public comment window closed late July 2026, and a full legislative process still lies ahead. But the substance of the Memorandum, a 100% backing requirement, a hard no on yield, a genuine redemption right, and extraterritorial reach against foreign issuers targeting Israeli users, tells you where policy is heading well before the bill is drafted. For anyone building a stablecoin product with Israeli exposure, shekel-pegged or otherwise, the sensible move is to start mapping the Memorandum against your current structure now, and to consider submitting comments while the framework is still being shaped rather than after it hardens into law.
