Proposed Government Bill Allowing Foreign Service Providers to Obtain a “Tailored License” to Operate in Israel
18 May 2026
On May 11, 2026, the Supervision of Financial Services (Regulated Financial Services) Law (Amendment No. 18), 2026 (the “Proposed Amendment“) was published.
The government bill, which was submitted to the Knesset for a first reading, includes several amendments to the Supervision of Financial Services (Regulated Financial Services) Law, 2016 (the “Law“) which regulates, inter alia, the provision of credit and other financial services (including in relation to digital assets). Primarily, it is intended to enable foreign entities engaged in the provision of financial services outside Israel, whose activities are regulated under foreign law (a “Foreign Service Provider“), to obtain a license to operate in Israel under the supervision of the Israeli Capital Market, Insurance and Savings Authority (“CMISA“).
The purpose of the Proposed Amendment is to increase competition in the local market by encouraging the entry of international players into Israel’s financial services sector, while maintaining oversight by the Israeli regulator and protecting customers. According to the explanatory notes to the Proposed Amendment, the proposed framework implements the relevant government decision regarding the promotion of regulation in the field of digital assets and aligns with a similar regulatory approach previously adopted in Israel in relation to payment services and financial information services, under which certain regulatory reliefs may be granted to Foreign Service Providers.
Under the Proposed Amendment, it is proposed that the supervisor of financial service providers (the “Supervisor“) (being the Commissioner of the CMISA) will be authorized to grant a Foreign Service Provider an extended license for the provision of financial asset services or a credit provider license, even if it does not comply with all of the licensing requirements currently set forth under Law.[1] This would be subject to the Supervisor being satisfied that the foreign regulatory regime governing the Foreign Service Provider provides an adequate substitute for the licensing requirements under the Law, and provided that the entity is solvent, capable of complying with the provisions of the Law, and that such provisions may be enforced against it. In addition, it is proposed that the license would be subject to specific conditions determined by the Supervisor as part of the license itself.
Accordingly, entities holding a foreign license may obtain a “tailored license”, subject to the Supervisor’s discretion and conditions, in a manner that allows consideration of the foreign regulatory framework applicable to them, including the imposition of specific conditions based on the foreign license they hold, while protecting customer interests and broader public interest considerations.
The Proposed Amendment further suggests establishing a similar framework in relation to an extended license for the operation of a credit mediation system, such that the Supervisor would also be authorized to grant such a license to a Foreign Service Provider, based on the foreign regulatory regime applicable to it and subject to conditions set forth in the license.
In addition, it is proposed to authorize the Supervisor to exempt a licensed Foreign Service Provider from the provisions of Chapters D and E of the Law, which address corporate governance, control permits, and holding permits in licensed entities. Such authority may only be exercised where the Supervisor is satisfied that the foreign law applicable to the relevant Foreign Service Provider provides an adequate regulatory response to such matters, while protecting customer interests and public interest considerations.
The explanatory notes to the Proposed Amendment clarify that the proposed amendments do not constitute a complete exemption from the requirements of the Law, but rather an adjustment of the applicable requirements to the foreign licensing regime under which the Foreign Service Provider operates, subject to the Supervisor`s judgment.
For the full text of the Proposed Amendment >> Click here
Our firm continuously monitors regulatory developments in the financial services sector and regularly advises international financial institutions on regulatory, licensing, and compliance matters relating to CMISA and other regulatory authorities.
We would be pleased to assist with any questions or clarifications regarding the Proposed Amendment and its potential implications.
[1] Those set forth in Sections 15(a) and 16(a) of the Law.
