Israel's Knesset Unveils Crypto Strategy to Boost Economy by $120 Billion

In a significant move towards embracing the digital economy, Israel's Knesset hosted an event titled "A Crypto Strategy for Israel - A Growth Engine for the Israeli Economy." This gathering brought together members of parliament, regulators, entrepreneurs, and industry leaders to unveil the final report of Israel’s National Committee for Crypto Strategy. The report outlines a roadmap aimed at transforming Israel into a global crypto powerhouse, contingent on swift government action.

The event underscored both the opportunities and challenges facing Israel’s crypto sector. While the country boasts strong technological foundations and entrepreneurial talent, regulatory uncertainty has hindered progress and driven companies abroad. The new strategy seeks to address these issues with clearer rules, better coordination, and stronger support for innovation. The focus now is on how quickly lawmakers can implement these recommendations and whether Israel can capitalize on this moment to define its role in the global digital economy.

The committee’s report cautions that while other countries such as the United States, Singapore, and Dubai are advancing with proactive crypto policies, Israel is experiencing brain drain and a flight of entrepreneurs due to regulatory uncertainty. If adopted, the crypto sector could contribute up to $120 billion to Israel’s GDP over the next decade. Arik Pinto, former CEO of Bank Hapoalim and chairman of the committee, emphasized the urgency, stating, "If we act now and provide certainty to the industry, we can position Israel as a world leader in crypto." Knesset member Oded Forer (Yisrael Beitenu) and MK Vladimir Beliak (Yesh Atid) echoed this sentiment, stressing the need for immediate action.

Israel currently hosts around 160 crypto and blockchain companies, employing over 3,300 skilled workers and raising more than $4.25 billion to date. However, the sector has faced significant challenges, with the number of active companies dropping by 7.5% and the workforce shrinking by 12% in 2024 alone, indicating a contracting industry.

The committee’s strategic framework is based on five core pillars: establishing a unified regulator, developing AML and CFT measures, introducing tax reform, defining token issuance rules, and integrating banking. The committee called on the government to adopt a smart, consolidated regulatory approach to grant entrepreneurs stability and encourage innovation. It also recommended building a national blockchain infrastructure to enable transparent governance and secure data flows.

Nir Hirshman, CEO of the Crypto Companies Forum and the initiator of the public committee to promote a crypto strategy for Israel, highlighted the extraordinary opportunity Israel has. He noted that the talent and entrepreneurs are already present in the country, and the call by Members of Knesset Beliak, Forer, and Illouz for the government to adopt the committee’s recommendations is the right course of action. This approach has worked in Europe and the U.S., and it is the direction Israel needs to take to position itself as a crypto powerhouse and turn crypto into a major growth engine for the economy.

Lawmakers voiced strong support for the initiative. Opposition Finance Committee chair MK Vladimir Beliak called the conference a "milestone in the dialogue between technological innovation and regulation," urging legislative action to remove roadblocks and make crypto a real economic engine. MK Dan Illouz (Likud) stressed that technologies like crypto are the foundation of the global financial future, and Israel must not miss the opportunity. MK Oded Forer noted that Israel’s future hinges on proactive policy, stating, "The question is not if but when. Israel can and must be the engine of the crypto industry rather than a trailing wagon."

Industry leaders also weighed in on the challenges and opportunities. Youval Rouach, co-founder and CEO of Bits Of Gold, identified the banking bottleneck as the primary obstacle, stating that solving this issue would address 90% of the industry’s problems. Lior Lamesh, co-founder and CEO of GK8, pointed out that Israel possesses world-class digital asset custody technology but lags in regulation. Prof. Eli Ben-Sasson, co-founder and CEO of StarkWare, urged immediate action to retain Israel’s global leadership in cryptographic research, while Prof. Benny Pinkas called for leveraging Israel’s unique cryptographic talent to build local jobs instead of exporting value abroad.

The crypto debate in Israel is ultimately a test of the country’s ability to adapt and lead in an era defined by rapid technological disruption. In the past, Israel has shown that it can transform big ideas into global industries, from cybersecurity to autonomous vehicles to medical innovation. However, crypto presents a more complex challenge, sitting at the intersection of finance, technology, policy, and national security.

Seizing this opportunity means more than passing new laws or tweaking tax codes. It requires cultivating a mindset that welcomes experimentation and is willing to take calculated risks. It demands a commitment from policymakers to understand the nuances of decentralized technologies and to engage directly with entrepreneurs rather than treat them as adversaries. It also means investing in education and workforce development so that the next generation of Israeli talent is equipped to thrive in a decentralized digital economy.

If Israel can rise to meet this moment, it has the potential to not just participate in the global crypto landscape but to shape its rules, standards, and innovations. On the other hand, hesitation or half-measures will send a clear signal to founders and investors that Israel is content to watch from the sidelines. At its core, the path forward is about reaffirming Israel’s identity as a fearless innovator - a nation that doesn’t wait for the future to arrive but actively builds it. The decision is no longer whether to engage, but how boldly and how fast.