Directive requirements


On 9 May 2022, the Israeli banking supervisor published an important new directive, by way of an amendment to Directive 411, the Directive regulating the duties of Israeli banks in connection with the efforts to prevent anti-money laundering and terrorism financing. The new directive sets forth the duties of Israeli banks regarding the provision of payment services in connection with their clients' cryptocurrency activities.

The Israeli cryptocurrency community has long awaited this new directive. The appetite of Israeli clients to perform cryptocurrency transactions through their bank accounts has increased during the past few years, and clients have been asking their banks to enable them to transmit from and receive to their bank accounts funds deriving from such activities, which the clients regard as perfectly legitimate. The Israeli banks, on their part, in the absence of any clear guidelines from the banking supervisor, mostly chose to take an extremely conservative approach to these activities and did not allow their clients to perform many transactions.

The banking supervisor's general position has been, as reflected in the new directive, that cryptocurrency activities can be exploited as a means to facilitate money-laundering and terrorism financing, and, as such, these activities are considered high risk activities. Hence, there is a need to exercise enhanced monitoring measures in connection with this type of activity.

Directive requirements

The new directive requires Israeli banks to perform a specific risk assessment in connection with cryptocurrency activities. Within this risk assessment, banks should take into consideration:

  • the possibility of the parties involved in these activities to remain anonymous;
  • the fact that many transactions of this sort are performed without the involvement of a regulated financial intermediary, without face-to-face identification of clients or other proper verification of their identity; and
  • the rapid and global nature of these transactions.

Israeli banks are required under the new directive to establish a policy and internal procedures that will apply to payment services connected to cryptocurrency activities of their clients. The banks must publish the main terms of the policy on their website and must further inform the client thereof, whenever possible, the first time that the client requests to transfer funds from their bank account to a cryptocurrency service provider.

The banks' policy should address the following matters:

  • The main and most important rule is that a bank may not generally refuse to provide payment services only because the source of the activity relates to cryptocurrency, if the transaction is performed through an entity that is fully licensed in Israel to provide cryptocurrency payment services.
  • Currently, many cryptocurrency payment service providers are acting without such full licence, under a temporary authorisation, enabling them to continue activities they used to perform prior to the entry into force of the specific licence requirements. The service providers acting under such temporary authorisation are not considered to be fully licensed for the purpose of the above rule. With respect to clients acting through the temporarily authorised service providers or through service providers licensed outside of Israel, the bank should determine within its policy how to assess the risk associated with the activities of such service providers, and it should take into account the jurisdiction of the service provider and the legal anti-money laundering requirements applicable therein, as well as the internal procedures of the service provider.
  • The directive introduces the concept of activity "routes", which includes reference to the movements in the cryptocurrency or changes in the address of the digital wallet, the route of conversions of the cryptocurrency into Israeli or foreign currency from the first currency conversion until its deposit in the bank account. The bank's policy must refer to permitted and non-permitted routes based on its risk assessment. The directive includes two examples of routes that are of low risk:
    • where the cryptocurrency was purchased to and sold from the same digital wallet of a client without further movements or changes; and
    • where the cryptocurrency is obtained directly through mining without further movements or changes in the digital wallet.
  • Where the annual volume of a client's cryptocurrency transactions exceeds 100,000 Israeli shekels, the bank must check the sources of the funds with the client.
  • The bank must determine a policy and monitoring measures regarding the provision of payment services through peer-to-peer automatic platforms.

Every six months, banks should inform their senior management and board of directors of:

  • the aggregate volume of the cryptocurrency transactions performed by their clients;
  • the main risks associated with such activities; and
  • the measures taken to monitor them.


The new directive will officially enter into force on 9 November 2022. While it is considered an important step through a clearer regulation of cryptocurrency activities, it remains to be seen how banks will elect to implement the new directive and the effect that this will have on the industry.

For further information on this topic please contact Shiri Shaham or Yuval Shalheveth at Yigal Arnon & Co by telephone (+972 3 608 7777) or by email ([email protected] or [email protected]). The Yigal Arnon & Co website can be accessed at