Israeli Crypto Industry Faces Decline Without Urgent Regulatory Reform, Warns CEO

Nir Hirschman Rov, CEO of the Israeli Crypto Companies Forum, highlighted the urgent need for comprehensive regulatory reform in Israel's cryptocurrency sector. Despite recent regulatory efforts by the Capital Market Authority and Bank of Israel, Hirschman Rov said Israel lags significantly behind countries like the United States, where clear policies encourage entrepreneurs to remain and grow domestically. He noted that Israeli crypto firms still face banking difficulties and double taxation issues, prompting many startups to establish themselves abroad.

Hirschman Rov cited a KPMG study showing that removing regulatory barriers could add 110-120 billion shekels to Israel's GDP and create 70,000 jobs within a decade. Conversely, maintaining the status quo risks a loss of 50-90 billion shekels and limits the industry to about 4,000-5,000 employees. He called for a unified legislative package within the upcoming state budget law to pass stalled bills on digital assets and stablecoins within the government's first 100 days. Without this, he warned, the local crypto industry will continue to shrink, with talent and companies relocating overseas.

Regarding the Bank of Israel's digital shekel (CBDC) project, Hirschman Rov expressed concerns about unprecedented government control over citizens' funds and potential harm to private stablecoin competition. He contrasted Israel’s approach with the U.S., where federal digital currency issuance is currently prohibited to protect individual freedoms, and China, which fully implements a CBDC for surveillance purposes.

Addressing recent cyber incidents like the Bits of Gold data leak, he argued that the sector’s security mechanisms proved effective, with no customer funds lost and uninterrupted service. Hirschman Rov emphasized Israel’s global leadership in crypto security technology and the sector’s potential to reduce banking fees and improve financial services, especially in cross-border payments.

He also provided a primer on crypto, explaining Bitcoin’s origins as a decentralized alternative to traditional banking post-2008 crisis, the role of blockchain technology, and the importance of stablecoins backed 1:1 by liquid assets like U.S. Treasury bonds. Hirschman Rov noted that 21% of Israelis currently hold digital currencies, with 1.5 million having engaged with crypto, reflecting widespread public interest.

Finally, he highlighted Israel’s unique advantage in cryptography and blockchain innovation, rooted in its strong theoretical computer science tradition and early contributions to platforms like Ethereum. Hirschman Rov stressed the need for privacy and security in the industry, citing risks of violent extortion against crypto holders and the importance of protecting private keys.