Crypto Lawyer

A crypto lawyer assists investors and traders in dealing with the Israel Tax Authority and banks. Under Income Tax Circular 05/2018, virtual currency is classified as an asset, meaning every sale or conversion constitutes a tax event. When the sale proceeds reach a bank in Israel, the compliance department requests documentation on the source of funds. At our firm, the field is led by Adv. & CPA Shlomi Vaknin, so the tax calculation and the source-of-funds file are built together. Send us your transaction files from the exchanges, and we will review what needs to be reported and what the bank may request.

Most inquiries come the moment funds need to leave the exchange, or when a letter arrives:

• You sold coins on a foreign exchange, and the Israeli bank held the transfer and requested source-of-funds documentation.

• The bank refused to accept the funds, or refused to open an account for the transfer.

• You swapped between coins over several years and don't know how to calculate the tax on each conversion.

• You have profits from prior years that were never reported, and the voluntary disclosure procedure has already ended.

• You received a document request or a hearing invitation from the Tax Authority regarding crypto activity.

• The police seized a hardware wallet, phone, or computer with access to your coins.

• Your trading volume has grown, and you want to know whether the Tax Authority will classify it as a business.

A crypto case typically involves two bodies: the Israel Tax Authority, which determines the tax liability, and the bank, which decides whether to accept the funds. When there are unreported years, the question of criminal exposure also arises.

Tax on Crypto Profits

Income Tax Circular 05/2018 classifies virtual currency as an asset, not a currency. A sale, a conversion into another virtual currency, and a payment made in virtual currency are all tax events. A private investor pays capital gains tax of 25% on the real gain. Anyone whose taxable income in 2026 exceeds NIS 721,560 also pays a 3% surtax on the portion above that amount, plus an additional 2% on capital-source income exceeding it (Section 121B of the Income Tax Ordinance). When the activity rises to the level of a business, the profit is taxed at the marginal tax rates, up to 50% including surtax, and for VAT purposes the business is classified as a "financial institution." Full details are on the page Tax on Crypto and Bitcoin.

The Bank and Source of Funds

A bank receiving funds from a crypto service provider operates under the Anti-Money Laundering Order for Banking Corporations and under Bank of Israel Proper Banking Management Directive 411. Currently, when transfers from crypto service providers to an account exceed NIS 100,000 per year, the bank is required to verify the source of funds and the coin trail. There is no way to compel a bank in advance to accept a transfer. An unexplained refusal can be complained about to the bank's Public Complaints Commissioner, and then to the Public Inquiries Unit at the Banking Supervision Department. What goes into the file submitted to the bank is explained on the page Proving the Source of Crypto Funds to the Bank.

Unreported Years

The Tax Authority's voluntary disclosure procedure ended on 31.8.2026, and as of October 2026 no new procedure has been published. It is still possible to report and pay the tax with linkage differentials and interest, but without the protection from criminal proceedings that the procedure provided. Therefore, the exposure is first assessed under attorney-client privilege, and only then is the Authority approached. The available options are detailed on the page Voluntary Disclosure for Crypto: What to Do With Unreported Profits.

Four updates currently affect anyone holding crypto funds:

• The voluntary disclosure procedure (temporary order) ended on 31.8.2026. According to a Tax Authority announcement dated 7.9.2026, 203 of the applications filed under it involved digital assets, with a declared value of approximately NIS 482.5 million.

• According to the Tax Authority announcement from August 2026, the temporary-order procedure for paying tax on crypto profits to the Authority's account at the Bank of Israel (Form 909) has been extended through 31.12.2027. It applies to individuals only, and only if at least one Israeli bank refused to accept the funds.

• In October 2026, the Bank of Israel published the final version of the amendment to Directive 411, which will take effect on 1.5.2027. The NIS 100,000 threshold will be abolished, and the review will be determined by risk level. For funds from regulated entities, the bank may conduct a limited review, but the relaxations do not guarantee that every deposit will be approved.

• In November 2024, Israel announced its commitment to adopt CARF, the OECD framework for automatic exchange of information on digital assets, starting in 2027.

1. First meeting under privilege. You tell us which exchanges and wallets you used, during which years, and what has been reported to date. It is helpful to bring transaction files, wallet addresses, and annual tax returns that were filed.

2. We reconstruct the coin trail: where the money used for the purchase came from, through the conversions and transfers between wallets, up to the sale. Blockchain transactions are public, so they can be matched against the exchange files.

3. We calculate the tax for each year, determine whether the activity qualifies as an investment or a business, and offset losses under Section 92 of the Ordinance.

4. We file returns or amended returns, or approach the assessing officer for a tax assessment agreement. When a bank has refused to accept the funds, we examine the Form 909 route.

5. We submit the source-of-funds file to the bank and respond to the compliance department's questions. If the request is denied without explanation, we proceed to a formal complaint.

The field is led by Adv. & CPA Shlomi Vaknin, the firm's founder, together with his team. He has been a certified public accountant since 2000 and an attorney since 2008, and served for nearly a decade as a national supervisor in the professional division of VAT at the Israel Tax Authority. In a crypto case, the calculation and the legal argument are interdependent: the same transaction reconstruction serves both the report to the Tax Authority and the file submitted to the bank, so it is best for both to be built by the same person.