Clients updates / Banking Regulation

On July 26, 2026, the Israeli Capital Market, Insurance and Savings Authority published a policy document for implementing a reform in the guarantee market, along with a draft update to the licensing procedure for regulated financial services and supplementary draft circulars. Public comments were accepted until August 16, 2026 and discussions of the comments will be held on September 7, 2026.

The Banking Supervision Department has published for public comment a draft Proper Conduct of Banking Business Directive titled “Supervisory Framework for Small and New Banks.” The purpose of the draft directive is to adapt regulatory and supervisory requirements to the size and complexity of small and new banking corporations’ operations, in accordance with the Basel Committee’s principle of proportionality, while maintaining banking system stability and protecting customers.

The Bank of Israel recently issued its decision to expand the identification code used by banking corporations and nonbank entities to connect to payment systems from two digits to three digits. While ostensibly only a technical change, in practice it is a significant step that will enable financial entities to hold accounts and transfer funds for customers directly and independently, without relying on existing banks.

On August 6, 2025, the interministerial team to increase competition in the retail banking sector (established by Israel’s Minister of Finance in collaboration with the Governor of the Bank of Israel) published its recommendations on the measures needed to increase competition in banking services.

Two key developments in the US mark a step toward stablecoin market institutionalization. the US Senate approved new legislation regulating activities in the market for the first time, and Circle – the issuer of the USDC stablecoin, launched an IPO on the NASDAQ.

New provisions set out the licensing framework for the provision of payment services, designed to encourage new players to enter the Israeli market and offer payment services while providing broad protection to consumers. The law will apply to companies providing payment services, credit service providers, acquirers, and more.

The risk of money laundering is one of the main risks involved in using and trading cryptocurrencies. This amendment to Proper Conduct of Banking Business Directive 411 addresses how banks should manage money laundering and terror financing risks.

Although Israel is a world leader in the fintech field, companies operating in this area face many regulatory challenges. A newly published legal memorandum aims to enable the creation of a “sandbox”, with inspiration from various programs already implemented in Japan, Australia, and Singapore. The goal is to establish a unique experimental environment, a “regulatory sandbox,” where regulatory relief is granted to companies who choose to participate in the program.

The Bank of Israel recently led several important developments in the Israeli payments market, which are designed to encourage competition and to advance the implementation of innovative technologies.

Bank of Israel published a position paper with respect to the activity of banks’ payment apps in the B2C market. The position paper is the conclusion of a long battle waged by credit card companies against the banks.

The Tel Aviv District Court issued a ruling recently on a case concerning a bank’s conduct with funds whose source is digital currencies. The court expressly ruled that the bank’s blanket ban on the opening of bank accounts by clients engaging in digital currency activity is unreasonable.

Precedent set by the Tel-Aviv District Court rules that a bank may refuse to provide service to a company engaging in virtual currencies.