As Bitcoin soars Israelis missing out on cryptocurrencies

President-elect Donald Trump's support for cryptocurrencies has boosted the industry as Israeli institutional investors get left behind.

Cryptocurrency investors abroad are in euphoria over the election of Donald Trump who has promised to back digital currencies. Many major investment institutions overseas have put flagship cryptocurrency Bitcoin, which has reached a record $89,000, into their portfolios. But in Israel the picture is completely different.

Israeli institutional investors (investment houses and insurance companies, which manage the public's long-term savings and pension funds), are still wary about investing in cryptocurrencies. According to the Bank of Israel's financial stability report, the Israeli public holds an estimated $1.5 billion in cryptocurrencies, which represents 0.1% of asset portfolios held by the public.

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In the first quarter of 2024, Israel was ranked 22nd among the OECD nations in terms of adopting cryptocurrencies, according to data published by the Bank of Israel. In calculating investment in digital currencies in relation to GDP, Israel is in a lower place than most OECD countries, but significantly higher than the US, which was in 37th, third place from last. However, these figures are from the end of the first quarter of 2024, before it began to look likely that Trump would win the presidential race.

The Bank of Israel said, "An analysis of private wallets with an Israeli connection that hold Bitcoin, reveals about 3,000 such wallets, most of which contain assets worth less than $10,000. Only about 60 wallets include an amount higher than that."

The scale of institutions' investments in cryptocurrency as part of their long-term investment portfolios is still small, and if at all it is made in shares of companies operating in the field, and not directly in the digital currencies. This is, among other things, due to the difficulties in obtaining the required regulatory approvals.

After years of a wary approach to cryptocurrencies, in the summer the Securities Authority approved an amendment to the securities exchange's by-laws that allows for the first time non-bank members of the exchange (mainly institutional entities) to provide their clients with trading and custody services in cryptocurrencies.

In addition, the Israel Securities Authority is examining prospectuses for mutual funds that will follow cryptocurrency futures contracts. The expectation is that in the first half of 2025 the prospectuses will be approved and then mutual funds will be offered to the public linked to the price of the currency, through futures contracts.

Published by Globes, Israel business news - en.globes.co.il - on November 12, 2024.

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