Israel's Central Bank Eases Rules on Crypto Deposits for Banks
Translated & summarized from Calcalist by baba
Israel's central bank has finalized new regulations allowing banks to process cryptocurrency funds more freely, effective May 1, 2027. The rules eliminate automatic checks for transfers over NIS 100,000, shifting to a risk-based assessment. Banks can no longer automatically refuse crypto-originating funds but must evaluate each transaction individually. The regulations also introduce risk-based due diligence, with stricter checks for high-risk activities and clearer disclosure requirements for customers.
The story in 6 lines · by baba
- New Bank of Israel regulations will allow banks to process cryptocurrency funds starting May 1, 2027.
- The automatic NIS 100,000 threshold for investigating crypto fund origins has been eliminated.
- Banks can no longer automatically refuse deposits originating from cryptocurrency activities.
- Transaction risk assessment, not a fixed monetary threshold, will determine the level of scrutiny.
- Stricter due diligence will be required for high-risk crypto transactions and entities.
- Disclosure rules for customers regarding crypto transactions have been clarified.
The Bank of Israel's banking supervision department has finalized new regulations for depositing cryptocurrency funds into the banking system, set to take effect on May 1, 2027. The most significant change eliminates the automatic requirement for banks to investigate the source and path of digital currency funds when annual transfers from crypto service providers to a customer's bank account exceed NIS 100,000. Instead, checks will be based on transaction risk levels, not a fixed monetary threshold.
According to the Bank of Israel, this move aims to refine the requirements for banks handling funds from virtual currency activities, thereby supporting expanded payment services for such operations. The central bank is signaling that concerns about money laundering cannot be a blanket justification for hindering legitimate crypto activities. Previously, crypto investors faced the challenge of proving the "currency path," detailing the digital currency's journey through various digital wallets and identifying parties involved, even after conversion to fiat currency.
The revised rules remove the requirement for banks to trace the path of fiat currency after conversion as part of the digital currency path investigation, though general anti-money laundering obligations remain. Banks will also be prohibited from automatically refusing funds originating from crypto. While not obligated to approve every deposit, banks must now assess each transaction's circumstances rather than rejecting it solely based on its crypto origin.
Transactions will be classified by risk. Funds from licensed Israeli crypto firms or foreign companies in low-risk jurisdictions with proper anti-money laundering mechanisms will be considered lower risk. In such cases, banks may conduct fewer checks, potentially waiving the currency path investigation. Conversely, high-risk transactions, such as those involving mixers, anonymous wallets, or transfers to high-risk countries, will necessitate more thorough due diligence, including in-depth source verification, written explanations, enhanced monitoring, and senior management approval.
The final regulations, incorporating public feedback, also address crypto companies and Initial Coin Offerings (ICOs). Banks must now examine the business activities and anti-money laundering controls of these companies. For ICOs, banks will assess factors like the offering's target audience, the nature of the token (e.g., stablecoin), its decentralization, potential uses, and the regulatory environment of the issuing country.
Disclosure rules for customers have also been clarified. Banks must inform customers about their policies regarding virtual currency transactions, providing clear and accessible information near the time of the first transfer from the customer's account to a crypto service provider. The Bank of Israel published a report detailing its reasoning, noting that the NIS 100,000 threshold was removed because transaction volume alone doesn't always indicate risk. The regulations will be reviewed in five years, with success measured by approved/rejected transaction volumes and public inquiries.
