2025 Year-End Review: Financial Regulation and Digital Currencies

2025 will be remembered as the year financial regulation succeeded in catching up with the pace of technological innovation, progressing from regulatory uncertainty to a clear framework encompassing many aspects of financial activity and suited to the modern era.

Throughout the year, regulatory authorities in Israel and around the world took action to institutionalize technological infrastructures, impose strict standards of corporate responsibility, and define clear rules governing the use of innovative technologies. The following is a summary of the key updates during 2025.

Recognition and Regulation of Digital Currencies and Financial Infrastructure

Dramatic progress was made in 2025 in the institutionalization of digital assets and their transformation into an integral part of the payment system. The US Senate approved the first federal legislation regulating the issuance and management of stablecoins, a move reinforced by Circle Internet Group’s IPO on NASDAQ and that positioned the stablecoin as a legitimate bridge between traditional systems and blockchain technologies.

In Israel, the Bank of Israel published a preliminary design of the digital shekel. It is intended to serve as a universal, immediate, and final means of payment operating 24/7, with the aim of increasing competition in the financial market and enabling the payment of interest on balances.

A precedent-setting ruling was also handed down in Israel in 2025. The court recognized, for the first time, the validity of electronic promissory notes in enforcement and collection offices. The ruling held that digital signatures fulfill the requisite legal requirements, thereby removing significant bureaucratic obstacles for fintech companies and businesses operating online.

In addition, the European Securities and Markets Authority (ESMA) published guidelines for preventing market fraud in crypto assets, with a particular focus on monitoring social media influencers and online groups as potential sources of coordinated market manipulation. These guidelines aim to combat market manipulation and the use of insider information in the digital currency arena, as part of the implementation of the MiCA regulation.

In the United States, the ruling in the Coinbase case criticized the SEC’s approach of “regulation through enforcement” and obligated the SEC to provide reasoned explanations for its policy positions, a move that strengthens the constitutional protections afforded to companies in the cryptocurrency sector.

Global Regulations, Privacy Protection, and Advanced Technologies

2025 was characterized by the tightening of technological and international standards that changed the rules of the game for investors and blockchain companies worldwide. One regulatory turning point was the launch of the MiCA regulations in the European Union, which created a uniform framework for crypto service providers pursuant to new regulatory reporting obligations. It also prompted corporations like Google to condition the advertising of crypto exchanges and digital wallets on possession of an appropriate license. Google’s policy change is intended to prevent tax evasion, combat money laundering, and encourage consumer protection legislation. Concurrently, the US Internal Revenue Service imposed new reporting obligations on crypto brokers in the US starting in 2025, while the UK and China tightened controls to prevent money laundering and market manipulation.

This was also the case in the fraud lawsuit against My Forex Funds (MFF). Although dismissed due to procedural misconduct by the US Commodities Futures Trading Commission, the dismissal constitutes only a “technical victory.” The original statement of claim now serves as a guide to business practices deemed improper by regulatory authorities, including misrepresentations about trading (demo environments versus actual trading), manipulation of trading software, and payment models tantamount to Ponzi schemes. This case heralds a new era of tight supervision of prop trading markets worldwide.

Toward the end of 2025, the predictions market was regulated for the first time in the United States. Kalshi Platforms obtained federal regulatory recognition as a designated contract market (DCM), setting a precedent that event contracts (such as those based on election results) are not considered illegal gambling. This achievement, which enabled Kalshi to raise an enormous volume of capital and officially become a “unicorn,” demonstrates how precise legal counsel and strategic cooperation with regulatory authorities can legitimize complex business models, even in areas adjacent to previously banned binary options trading.

In the field of privacy protection, the European Data Protection Board (EDPB) clarified its intention to bridge the structural gap between GDPR principles and the technological characteristics of blockchain. Features such as decentralization and immutability of information clash with the right to erase and correct data, but such restrictive technological features do not exempt organizations from complying with applicable regulations. These organizations are advised to prefer off-chain processing of personal information with the goal of predefining the status of fintech and crypto companies as information processors or controllers.

Financial Regulation in the Digital Age

The Israel Securities Authority (ISA) published a position regulating digital advertising relating to mutual funds. The position states that any digital interaction by a mutual fund manager—including “likes,” shares, tags, and comments—constitutes “advertising” that requires the trustee’s prior approval pursuant to Section 73 of the Joint Investment Trust Law. The ISA also expanded mutual fund managers’ liability for content published by third parties (influencers or consultants) who receive remuneration from fund managers. To contend with the dynamism of social networks, the ISA proposed a mechanism of “rigid advertising templates” that create a “green track” for real-time activities, subject to compliance with pre-approved procedures.

The ISA also allowed financial institutions to use AI-based chatbots to provide financial analyses, but imposed strict limitations to ensure clients do not mistakenly think they are receiving unlicensed personal investment advice. These limitations are based on the rationale of maintaining full transparency, avoiding the processing or filtering of original content, and ensuring users have direct access to the full analytical report.

During 2025, the ISA also published a report summarizing its findings on the offering of securities without a prospectus. The report is intended for entities planning to offer securities to the public and clarifies the boundaries of exemptions from publishing a prospectus. In it, the ISA emphasizes the obligation to carry out accurate and real-time documentation of offerees so as not to exceed the annual limit, and clarifies that providing potential investors with expected returns or benchmark data is tantamount to an “offer” that must be counted toward the offeree limit. The ISA also clarified that external marketers are considered an “extension” of the offering company and that their activities are attributed to that offering company.

In parallel, the Israel Money Laundering and Terrorism Financing Prohibition Authority (IMPA) published new regulatory requirements obligating reporting entities to proactively file suspicious transaction reports (STR) on activity related to the use of GenAI and deepfake technologies. The main threats posed include the forging of identification documents to circumvent KYC processes, sophisticated impersonation of executives for “social engineering” scams, and fraudulent money transfers.

Summary and Outlook for 2026: Implications and Practical Recommendations

2025 proved that technological innovation does not provide immunity from regulation. On the contrary, it requires the establishment of structured compliance mechanisms and proactive risk management. The key takeaway for companies is that supervisory responsibilities have trickled down from the corporate level to the personal level of officers, and that tools like AI and blockchain require strict compliance with regulations.

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Adv. Andrey Yanai is a partner in our firm’s Regulation Department.