Israeli Capital Market Authority Regulates Crypto Licensees’ Listings of Virtual Currencies

Backdrop: Wide-Scale Supply and Lack of Controls

Against the backdrop of the wide-scale global supply of virtual currencies and the risks of listing them without proper controls, including money laundering, terror financing, and internet fraud, Israel’s Capital Market, Insurance and Savings Authority (CMISA) is seeking to establish a regulatory framework for approving listings of new virtual currencies by licensed crypto service providers. The new initiative follows a surge in virtual-currency activity in Israel, where hundreds of thousands of customers receive crypto financial services involving billions of shekels.

Listing Policy Must Be Approved by the Board of Directors

The draft circular requires licensees to formulate a listing policy addressing, among other things, the whitepaper’s key features and reliability; the currency’s liquidity and tradability; the issuer’s identity and country of incorporation; the regulatory regime under which the issuer operates; operational, money laundering, and terror-financing risks; any affiliation of the currency or issuer with high-risk industries, such as gambling, gaming, and unsupervised decentralized networks; potential conflicts of interest with the issuer; the business considerations underlying the decision; and the listing’s potential impact on the licensee’s reputation.

The board of directors must discuss and approve the listing policy annually and submit the approved policy to the Commissioner. The draft circular and its explanatory notes prescribe different submission deadlines: 30 days under the draft circular and 60 days under the explanatory notes. This discrepancy will likely be resolved as part of the review of public comments on the draft circular.

Pre-Screening Criteria

In addition to requiring an internal listing policy, the draft circular establishes cumulative listing criteria. The currency must be listed with at least five licensees in the European Union or in New York State, have maintained a market capitalization of at least USD 500 million for six continuous months preceding the examination date, rank among the 50 digital assets with the highest market capitalization at that time, and meet diversification requirements. These requirements include that no single holder may hold more than 15% of the currency’s total circulating supply and that the 10 largest holders may not collectively hold more than 50% of the currency. The draft circular also prohibits the listing of non-fungible tokens (NFTs) and anonymity-enhanced cryptocurrencies (AECs).

CMISA prescribes an exception for stablecoins issued by an entity licensed and supervised by a competent authority in Israel, which may be listed even without fulfilling the regulatory criteria. The explanatory notes clarify that this exception is intended to encourage activities with stablecoins that have been issued in Israel and that its inception is subject to the enactment of the Supervision of Financial Services (Issuance of Stablecoins) Law, 2026.

Action Plan, Risk Manager, and Advance Notice

Before launching a virtual currency, licensees must formulate a detailed action plan that complies with the policies approved by their boards of directors. The action plan must include risk-identification and risk-assessment processes to be carried out jointly by the risk manager, the cybersecurity manager, and the officer responsible for the company’s AML/CFT obligations. It must also assess the company’s operational ability to support the asset, including its arrangements with liquidity providers, custody rules, and monitoring systems. Before the listing, the risk manager must assess whether the action plan is compatible with the currency’s characteristics and whether it can be implemented as proposed.

Licensees must also give the Commissioner written notice at least 60 days before the planned listing date. The notice must include a list of the currencies to be offered, documentation demonstrating the implementation of the listing policy, and the CEO’s attestation that the currencies meet the regulatory criteria. The 60-day notice period begins only once the Commissioner has received a complete written notice. If the notice period expires without an objection from the Commissioner, the licensee may publish a publicly accessible summary of the currency’s characteristics and associated risks, including the licensee’s relationships with the issuer or its principal service providers. The explanatory notes clarify that the Commissioner may reject an application if the listing creates an unreasonable risk to customers, the licensee’s stability, or the public interest.

Delisting of Virtual Currencies

The draft circular also regulates the delisting of virtual currencies. It requires a quarterly review of each listed asset’s compliance with the regulatory criteria and the company’s action plan; 30 days’ advance notice to the Commissioner, including disclosure of the circumstances of the delisting; 30 days’ advance notice to customers holding the asset or receiving custody services in respect of it; cessation of offerings of the virtual currency within three days after publication of the delisting notice; and disclosure in the engagement agreement that the licensee may delist the virtual currency at its discretion.

Practical Significance

The draft circular provides regulatory certainty for the first time to digital asset service providers licensed in Israel by establishing clear criteria and an orderly process for listing new virtual currencies.

The draft circular also establishes an orderly process, including a board-approved listing policy, the formulation and implementation of an action plan, mandatory review by the risk manager, advance notice to the Commissioner, and rules governing customer communications. The regulation is intended to facilitate diversification in the digital assets offered to the public while ensuring appropriate advance controls.

We recommend that licensees begin developing their listing policy, mapping their currently listed assets against the proposed criteria, preparing for the new work process, and updating their engagement agreements with customers accordingly.

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Adv. Efrat Cohen is a Partner and Head of the firm’s Regulation Department.

Adv. Avihai Tal is an associate in the firm’s Regulation Department.