Bank of Israel Finalizes New Guidelines for Crypto Deposits in Banks
The Bank of Israel has finalized new crypto banking guidelines effective May 2027, abolishing the automatic 100,000 shekel threshold for source-of-funds checks and shifting to a risk-based approach.
The Banking Supervision Department at the Bank of Israel has published the final version of new guidelines for depositing cryptocurrency funds into the banking system, set to take effect on May 1, 2027. The central change finalized in the regulation is the abolition of the automatic requirement to verify the source of funds and the digital coin route when transfer volumes from crypto service providers to a customer's bank account exceed 100,000 shekels per year. Once the amendment takes effect, checks will be determined according to the risk level of the transaction, rather than by a uniform financial threshold.
The stated goal of the move, according to the Bank of Israel, is to clarify what is required of the banking system regarding the acceptance of funds originating from this activity, in order to support the expansion of payment services concerning virtual currency activity. In other words, the Bank of Israel is signaling to banks that fear of money laundering cannot serve as a blanket justification for obstructing legitimate cryptocurrency activity.
Easing the Burden of the Coin Path
One of the biggest hurdles facing crypto investors until now was the need to prove the coin path to the bank—meaning the route taken by the digital coin during its holding period, including transfers between digital wallets used for holding and transferring coins, and the identity of the parties who sent and received it. Previously, the definition also included the route of the money after the digital coin was converted into fiat currency, such as shekels or dollars, until deposited in the bank. Under the new version, this component has been removed from the definition of the virtual coin path. This means banks will not be required to check all movements performed in fiat money after conversion as part of the digital coin path check, although they remain subject to general anti-money laundering obligations.
To address another major barrier for investors, the Bank of Israel explicitly states that banks cannot use a policy of automatic refusal to accept funds originating from crypto: A banking corporation shall not refuse to provide payment services incidental to virtual currency activity solely because the source of the activity is related to virtual currencies. This does not mean banks must approve every deposit, but rather that they must examine the circumstances of each transaction and cannot reject it simply because it involves funds received from the sale of digital coins.
Risk-Based Classification and Exceptions
Alongside the cancellation of the financial threshold, banks will be required to classify transactions according to their risk level. For example, if money comes from a crypto company holding an appropriate license from the Israel Securities Authority, this will be considered a risk-reducing factor. The same applies to a foreign company incorporated in a country not considered high-risk that has adequate mechanisms to prevent money laundering and terrorist financing, and holds an appropriate license in that country or another country meeting these conditions.
Depending on the overall risk level of the transaction, the bank may settle for narrower checks and even determine that a coin path check is unnecessary. The requirement to present an opinion from an external expert will also be restricted to cases where the risk level justifies it. Conversely, in cases where high risk arises, banks will be required to perform deeper checks. For example, when technologies are used to obscure the transaction route, such as crypto mixers—services that mix digital coins from different users to make identifying their source difficult. Additional risk factors include activity involving anonymous digital wallets, transfers related to high-risk countries, or unusual transaction patterns without a clear economic explanation.
Final Adjustments and Public Reporting
The final version, formulated after publishing a draft for public comments last July, preserves its core principles but includes several changes and refinements. The most prominent concerns companies operating in the crypto field and companies raising capital through digital coin issuance, known as an ICO. In the final version, banks are also required to examine the business activity characteristics of these companies and their control mechanisms for preventing money laundering and terrorist financing, to the extent they exist.
Alongside the publication of the final directive, the Bank of Israel also published a report detailing the considerations behind the regulation. The report explains that supervision considered raising the 100,000 shekel threshold, but ultimately decided to abolish it entirely, based on the perception that the transaction amount alone does not necessarily indicate the risk involved. It was also determined that the regulation will be re-examined five years after taking effect.
