Israel Proposes New Regulation for Stablecoins to Boost Crypto Economy

Israel's Ministry of Finance and Capital Market Authority have published a draft law for public comment aimed at regulating the issuance of stablecoins in the country. Stablecoins are digital currencies pegged 1:1 to a central currency, designed to maintain value stability while being issued by private entities rather than the central bank. The proposed regulation will grant the Capital Market Authority licensing and supervisory powers over stablecoin issuers, creating a regulatory framework to protect consumers and integrate the crypto economy into Israel's financial system.

This regulatory move responds to the rapid global growth of stablecoins, which have become a key driver in digital asset markets. Stablecoins facilitate fast cross-border transfers, online commerce, and financial innovation by enabling instant, low-fee payments without traditional banking delays. They also offer secure online payment experiences that protect consumers from credit card data exposure and reduce merchant fees. Additionally, stablecoins support programmable money features, allowing automated conditional payments without intermediaries.

Globally, over 200 stablecoins exist with a combined market value exceeding $300 billion and a monthly transaction volume around $2 trillion, growing annually by more than 40%. This trend is expected to become integral to future financial infrastructure, prompting Israel to align its laws with international standards such as the U.S. Genius Act and the EU's MICA regulation. The draft law was developed with input from the Chief Economist's Office and Bank of Israel.

Currently, nine licensed digital currency service providers operate in Israel, with five licenses granted since the start of this year. The public consultation phase aims to involve industry stakeholders and the public in refining the legislation. In the coming weeks, the Capital Market Authority will hold roundtables and expert discussions with technology firms, fintech companies, financial institutions, and academics to address complex issues and ensure balanced, adaptable regulations that reflect ongoing business and technological developments.