The aim of the regulation is to allow "activity in stablecoins while managing the risk inherent in using them, and adjusting the consumer protections and prudential requirements".

The proposals include:

• Establishing a requirement for stablecoin issuers to hold reserve assets that will cover 100 percent of its liabilities to the coin holders. This requirement aims to reduce the prudential risk deriving from the activity in stablecoins.
• Licensing of stablecoin issuers - issuers of stablecoins that could have "systemic importance" will be licensed by the Banking Supervision Department,  while others will be licensed by the Capital Market Authority. 
• Bank of Israel's payment systems oversight function to oversee stablecoins that are declared to be "a controlled payment system".
• Establishing coordination mechanisms among the relevant regulators to enhance the supervisory efficiency.

The document also refers to rules of activity for the stablecoin issuers in Israel and to licensing and oversight arrangements that are adjusted to their activity.

The deadline for comments is 15 March 2023.

The amendments would define digital assets as digital representations of value that are used for investment and can be transferred using distributed ledger. Digital assets would be classified as "financial instruments" under Israeli securities law. 

The Israel Securities Authority has invited the public to provide feedback on its proposal. Deadline for comments is 12 February 2023.

The committee made the following recommendations: 

• Tailor made disclosure regime: disclosure requirements should be adapted to the unique features of the activity of these companies, based, among other things, on the experience that the ISA will accumulate as entrepreneurs considering an issuance of cryptoassets would approach the ISA, and learn from the experience of other regulators.

• Easing of restrictions through a regulatory sandbox: the ISA is a member of an inter-ministerial committee that recently recommended the establishment of a customized regulatory environment for firms that employ new technologies to offer financial products and services. We recommend allowing the use of this framework, when established, to experiment with the issuance of cryptoassets and to provide guidance to entrepreneurs in this field.

• Regulatory infrastructure for security token trading platform: adjustments to existing regulation should be considered, to create a regulatory infrastructure that is more suitable for the activity of this industry and optimally addresses the specific risks that the industry represents.

The committee also recommended to consider applying a model similar to the one adopted for crowdfunding regulation for projects involving cryptoassets that are deemed securities. 

The report's recommendations are as follows:

1. "A cryptocurrency will be deemed a security according to the totality of the circumstances and features of each case, taking into account the purposes of the law.
2. Cryptocurrencies that confer rights similar to the rights conferred by traditional securities such as shares, bonds, or participation units, will be deemed securities.
3. As a general rule, cryptocurrencies that are designed to be used exclusively as a medium of payment, clearing, or exchange and are not limited to a specific venture; that do not confer additional rights; and are not controlled by a central entity — will not be deemed securities.
4. In general, cryptocurrencies that represent a right to a product or service and are acquired solely for the purpose of consumption and use will not be deemed securities. In this regard, the relevant test is the actual purpose of the acquisition. Therefore, if the token cannot be used when it is issued or if it can be traded on a secondary market, these may be indications that its acquisition was made for investment rather than for consumption purposes.
5. The use and extension of specific existing and future capital raising tracks for ICOs should be considered, including an examination of the following issues: lenient regulation for small-scale ICOs; raising capital through ICOs on crowdfunding platforms; defining a provisional framework for ICOs pilots, in the form of a regulatory sandbox, including oversight of the cryptocurrency developers, and; examining the option of relying on foreign regulation that applies to cryptocurrencies.
6. If ICOs are conducted on the basis of prospectuses, the disclosure requirements defined in the Securities Law must be adjusted to the unique features of this field, in line with adjustments made in the past to other areas of operations (such as real estate, gas and oil, and biomed).
7. Whether an ICO constitutes an offer of securities to the Israeli public will be determined according to the features of the offer. An offer will not be deemed a public offer in Israel if its features clearly show that it does not target the Israeli public, (based on the language of the offer, and an absence of marketing and advertising activities targeting investors in Israel). The committee invites a discussion on whether the current tests should be adjusted to the decentralized and cross-territorial nature of ICOs."

The ISA decided that the TASE indices will not include cryptocurrency companies.

Accordingly, the ISA will take steps to promote a provisional amendment to the TASE Rules & Regulations to restrict inclusion in TASE indices of public companies whose main activity is the holding of, investment in, or mining of decentralized cryptocurrency (such as bitcoin, ethereum and others).

The aim of the amendment is to prevent public companies operating in this risky, speculative field, characterised by high trading volatility, from being included in the TASE indices and in the investment portfolios of passive investors.

The amendment will be in force for a limited period of one year, at the end of which it will be revisited according to market developments.

Shmuel Hauser, the chairman of the ISA, told a business conference that proposals will be put forward to the ISA board next week, warning that he viewed the recent skyrocketing prices as "a bubble".

If approved, the proposals would be subject to a public hearing and then the stock exchange bylaws would need to be amended. He also said that regulation was necessary “because the public is unprotected”.

Under the Israeli regulator’s plans, companies whose “principal services” are in digital currencies will not be allowed to trade on the Tel Aviv market, while those that are already listed but shift “the majority of its operations“ to bitcoin would be removed from the exchange.

“If the main business [of a company] is digital currencies we would not allow it. If already listed, its trading will be suspended,” Hauser said, adding that the ISA must find the appropriate regulation for such companies.

Hauser did not identify any companies that would be affected by his ban, but at least two firms listed on the Tel Aviv stock exchange now describe digital currencies or the technology behind them as essential to their business: Blockchain Mining and Fantasy Network.