Israeli Crypto Leaders Outline $120bn Growth Strategy to Avoid Brain Drain

The country needs regulatory clarity to foster innovation and entrepreneurship in the digital asset sector, according to the committee's report: “A Crypto Strategy for Israel – A Growth Engine for the Israeli Economy”.

Urgent opportunity

The crypto sector could add as much as $120bn to Israel’s GDP over the next decade, according to the report. It also contained a warning that continued regulatory inertia may prompt a significant brain drain. There are currently around 160 crypto and blockchain companies in Israel, which employ over 3,300 skilled workers and have raised over $4.25 billion. However, in 2024, the number of active companies dropped by 7.5% and the workforce shrank by 12%.

“If we act now and provide certainty to the industry, we can position Israel as a world leader in crypto,” said Arik Pinto, chairman of the committee and a former CEO of Bank Hapoalim.

The report also warned that other countries are setting the regulatory agenda for the crypto space. Of the major economies, the US is taking the lead with regulations designed to encourage innovation, having seen crypto business lured away to laissez-faire regulatory regimes such as Hong Kong and Dubai. The EU, conversely, is more focused on investor and consumer protection. The committee emphasized how important it is for Israel to forge its own path.

Five pillars

The report included five strategic pillars to guide policy, aiming to balance investor protection with innovation incentives:

1. A single regulatory body to oversee crypto activity and support a national vision
2. Risk-based AML and CFT guidelines
3. Competitive tax policies, aligning crypto incentives with those of traditional high-tech firms
4. Legislative and regulatory clarity for stablecoins and utility tokens
5. Updated banking supervision directives to enable clear risk management frameworks

Digital shekel

Israel’s central bank is discussing plans for a central bank digital currency, the digital shekel. If it does go ahead, the currency would support offline transactions, instant settlements and interoperability with other payment systems. However, no decisions are expected within the next 18 months.

MK Oded Forer, a former minister and member of the opposition Yisrael Beiteinu party, urged swift action. “The question is not if but when,” he said. “Israel can and must be the engine of the crypto industry rather than a trailing wagon.”