Written by: Haim Ravia, Dotan Hammer
On October 7, 2026, the Supervisor of Banks at the Bank of Israel issued Circular H-06-2862, amending Section 87A of Proper Conduct of Banking Business Directive 411 on the management of money laundering and terror financing risks. The amendment changes the way Israeli banks handle payment services connected to customers’ virtual currency activity. Its central rule is that a bank may no longer refuse to provide such services solely because the source of the funds is virtual currency. The amendment will take effect on May 1, 2027.
Section 87A, which was added to Directive 411 in May 2022, governs payment services related to customers’ activity in virtual currencies. In explaining the amendment, the Supervisor points to the growth of virtual currency activity, the licensing of virtual currency service providers in Israel by the Capital Market, Insurance and Savings Authority, and the extension of anti-money laundering obligations to those providers. Against this background, the Supervisor states that it supports the development of payment services for virtual currency activity while maintaining financial stability, and adopts a risk-based approach informed by local experience and international standards. The amendment is accompanied by a regulatory determination report under the Principles of Regulation Law, 5781-2021, which describes the changes as intended to reduce regulatory barriers and increase certainty.
Under the amended directive, each case must be examined on its merits through a risk-based assessment that considers the virtual currency service provider involved in the transaction, the characteristics of the virtual asset, the customer, and the size and complexity of the transaction. Banks must adopt a risk assessment methodology and define when a check of the source of funds and the path of the virtual currency is required, how extensive that check should be, and when no check is needed. The amendment deletes the previous requirement to inquire into the source of funds once a customer’s annual activity exceeds NIS 100,000; such inquiries will now depend on the risk level. To verify the path of the funds, a bank may conduct its own check, rely on documents provided by the customer, obtain confirmations from a service provider licensed in Israel, or, where the risk level requires it, rely on an external expert acceptable to the bank.
The circular identifies risk-reducing factors, such as a provider licensed in Israel by the Capital Market, Insurance and Savings Authority or a provider licensed in a country that is not high-risk, and risk-increasing factors, such as unregulated providers, providers in high-risk jurisdictions, anonymity-enhancing tokens, the use of mixers, and wallets linked to illegal activity. Enhanced due diligence applies to anonymous wallets, unusual patterns lacking economic logic, and activity involving high-risk countries. Notably, banks may not set a closed list of permitted tokens. The amendment also requires banks to define when they may accept funds raised through an initial token issuance, taking into account whether the offering is public or private, the type of token, its possible uses and the legal regime of the issuing country. Finally, the information that banks provide to customers about the conditions for receiving these services must be effective, clear and accessible.
Click here to read the Bank of Israel’s Circular H-06-2862 (in Hebrew).
