Bank of Israel Eases Crypto Deposit Rules to Expand Virtual Currency Services
The Bank of Israel's Banking Supervision Department published a draft directive on Tuesday proposing significant relaxations in the rules for depositing cryptocurrency funds into the banking system. The key change removes the automatic requirement for banks to investigate the source and digital trail of any customer deposit exceeding 100,000 shekels annually. This move aims to clarify banking obligations regarding virtual currency transactions and support the expansion of payment services involving cryptocurrencies.
Previously, banks had to rigorously trace the "path of the currency," defined as all virtual currency movements and wallet addresses involved during the holding period, focusing on the identities of senders and recipients and the conversion route to fiat currency. Under the new draft, once the cryptocurrency is converted into regular money (such as shekels or dollars) and passes through regulated bank accounts, banks will no longer be required to continue tracking its origin.
This change follows two years of monitoring the initial regulations issued in May 2022, which imposed strict and discretionary investigation duties on banks for deposits over 100,000 shekels, even after conversion to fiat currency. The Bank of Israel now explicitly prohibits banks from automatically refusing payment services solely because the funds originate from virtual currencies.
Instead of uniform strict rules, banks will assess transactions based on risk levels. Deposits from licensed crypto companies in Israel or from foreign jurisdictions not deemed high-risk will be considered lower risk, potentially exempting banks from further investigation. Conversely, high-risk cases, such as those involving anonymizing technologies, anonymous wallets, or dealings with high-risk countries, will require enhanced due diligence. This includes active investigation of the customer's overall wealth source, written documentation for each transaction step, and senior management approval.
The draft is currently open for public comment and is expected to take effect about six months after final publication.
