Draft Bill for the Supervision of Financial Services (Issuance of Stablecoins) – Published for Public Comments

We wish to bring to your attention that on June 29, 2026, the Israeli Ministry of Finance published for public comments the Draft Bill for the Supervision of Financial Services (Issuance of Stablecoins), 2026 (the “Draft Bill“), which is intended to regulate, for the first time under dedicated primary legislation, the activities of entities engaging in the issuance and offering of Stablecoins in Israel.

Comments on the Draft Bill may be submitted until July 20, 2026.

The Draft Bill was published following the Israeli Government Resolution dated February 24, 2023, regarding the promotion of the regulation of activities in digital assets (the “Government Resolution“), which was adopted against the backdrop of the report of the Chief Economist at the Ministry of Finance on the regulation of the digital assets sector.

The Draft Bill is intended to enshrine in primary legislation certain conclusions of the Chief Economist’s report, as well as principles set out in the Government Resolution, by establishing a comprehensive framework for regulating the activities of Stablecoin Issuers. The proposed framework seeks to strike a balance between two key interests: on the one hand, encouraging the development, promotion and innovation of the sector in Israel while creating business certainty; and on the other hand, prudently managing risks to the economy, consumers and businesses, and preventing criminal actors from misusing this financial channel.

This proposed regulation should be viewed as part of a global trend toward the adoption of regulatory frameworks governing the issuance of Stablecoins, most notably MiCA in the EU and the GENIUS Act in the US.

The Draft Bill establishes a dedicated licensing regime for the issuance and offering of Stablecoins. In many respects, it is based on the Supervision of Financial Services (Regulated Financial Services) Law, 2016 (the “RFS Law“), including the designation of the supervisor of financial service providers under the RFS Law as the supervisor of Stablecoin Issuers, namely the Commissioner of the Capital Market, Insurance and Savings Authority (the “Supervisor“).

The Draft Bill also applies to a corporation engaging in the issuance of Stablecoins outside Israel (“Foreign Issuer“), where it issues or enables the use of Stablecoins by clients who are Israeli residents, if it directs its activities at such clients.

It should be noted that the RFS Law applies to the provision of services in financial assets, including certain activities involving digital assets, such as conversion, sale, custody, transfer or payments based on digital assets. Accordingly, there may be cases in which the activities of a Stablecoin Issuer will require an assessment of whether a license is also required under the RFS Law, in addition to the dedicated license proposed under the Draft Bill.

Main Provisions of the Draft Bill

• Imposition of a Licensing Requirement and Comprehensive Supervisory Regime on Stablecoin Issuers

The Draft Bill proposes to impose a licensing requirement on any person engaging in the issuance and offering of a Stablecoin.[1] Accordingly, such activity may not be conducted without obtaining a license from the Supervisor, and an applicant for a license would be required to meet a series of stringent conditions designed to exclude criminal actors and prevent financial risks, including meeting standards of “fitness and propriety”, maintaining financial stability, and having appropriate technological means and cybersecurity infrastructure to ensure the reliability of its systems. Control or holding of more than 10% of a certain means of control in a Stablecoin Issuer would also require an appropriate permit from the Supervisor.

In addition, the Draft Bill proposes to allow the granting of a license to a Foreign Issuer operating outside Israel, subject to meeting the conditions set out in the Draft Bill in this respect, including that the Issuer is supervised in its home jurisdiction and that the foreign law provides adequate protection to clients.

In this regard, we note that the Draft Bill also applies to a Foreign Issuer, where it issues or enables the use of Stablecoins by clients who are Israeli residents, if it directs its activities at such clients. The Draft Bill sets out a substantive, non-exhaustive test for determining whether a Foreign Issuer directs its services to clients in Israel, taking into account the overall circumstances. Relevant indications may include, among others, allowing a client to provide an Israeli address, addressing clients in Hebrew, offering services in Israeli currency or in a Stablecoin pegged to the New Israeli Shekel, or cooperating with a financial services provider, in order to enable the use of Stablecoins.

Issuing a Stablecoin without a license would constitute a criminal offense and may also result in the imposition of monetary sanctions. In this context, it should be noted that the Draft Bill proposes to grant the Supervisor broad supervisory, enforcement and administrative inquiry powers, including for the purpose of maintaining proper management and protecting the interests of Holders.

• Maintaining the Stability of the Stablecoin and Full Backing Requirement of 100% of Reserve Assets

The Draft Bill proposes to require full and ongoing alignment between the value of the issued Stablecoins and the value of the Backing Assets,[2] at a rate of no less than 100%. The Backing Assets would be required to be invested in low-risk and highly liquid instruments, such as cash or short-term government bonds, in order to enable rapid realization, including in times of crisis. The Issuer would be required to hold the Backing Assets in a dedicated and segregated account with a Managing Entity,[3] so that in the event of the Issuer’s insolvency, the Backing Assets would be used solely for the benefit of the Holders of the Stablecoin, and would not be exposed to claims by other creditors.

• Ensuring Redemption Rights, Broad Consumer Transparency and Publication of a Disclosure Document

The Draft Bill proposes to enshrine the Holders’ right of redemption. Each Holder would have the right to demand that the Issuer redeem the Stablecoin based on the value of the Reference Asset, promptly, under fixed terms and without charging a fee. At the same time, the Draft Bill imposes transparency obligations on the Issuer, foremost among them the obligation to publish a disclosure document in Hebrew at least 30 days prior to the issuance. The disclosure document must clearly present the characteristics of the Stablecoin, the pegging and redemption mechanism, and the risks associated with it.

• Robust Corporate Governance

The Draft Bill proposes to require an Issuer to establish an orderly corporate governance structure, including a board of directors consisting of at least three members, a chief executive officer, an auditor, and an obligation to appoint an independent compliance officer responsible for the Stablecoin issuance activity.

It should be noted that the Draft Bill states that, in accordance with the Government Resolution, the need for consumer regulation under law with respect to Stablecoins is being examined, taking into account the Payment Services Law, 2019. If, during the legislative process, a need for supplementary consumer provisions is identified, the need to amend the Draft Bill accordingly will be examined. In addition, required amendments to the Prohibition on Money Laundering Law will also be examined, for the purpose of regulating the supervision over the activity from an anti-money laundering perspective.

To view the Draft Bill (in Hebrew) >> click here

To view the report of the Chief Economist at the Ministry of Finance on digital assets (in Hebrew) >> click here

To view the Government Resolution regarding “Promoting the Regulation of Activities in Digital Assets” (in Hebrew) >> click here

Our firm has extensive expertise and many years of experience in the fields of financial services, digital assets and financial regulation. We regularly advise Israeli and international financial institutions and closely monitor regulatory developments in this field.

We would be pleased to assist with any questions or clarifications regarding the Draft Bill, including with respect to assessing its implications and submitting comments in connection therewith. 

[1] The term “Stablecoin” is defined in the Draft Bill as “a digital asset intended to maintain a stable value by reference to the value of a ‘Reference Asset'”, where the “Reference Asset” may include, among others, a currency that is legal tender in Israel (NIS), a foreign currency, a basket of assets composed of a combination of two or more types of Reference Assets (similar to the structure of an Asset-Referenced Token as set out under MiCA), or another asset to be determined by the Minister in consultation with the parties specified in the Draft Bill.

[2] The term “Backing Assets” is defined in the Draft Bill as “financial assets held by a Stablecoin Issuer for the purpose of ensuring the peg of the value of a Stablecoin to the value of a reference asset and for the purpose of securing the Issuer’s obligations toward holders as set out in Chapter F”.

[3] The term “Managing Entity” includes a banking corporation, as defined in the Banking (Licensing) Law, 1981, a holder of a license to provide deposit and credit services as defined in the RFS Law, and any other entity determined by the Minister of Finance, provided that it is supervised under law, including with respect to the prohibition on money laundering.