Israeli cryptocurrency transactions will cover 2.5 million bank customers in 2027

National Bank of Israel will provide cryptocurrency trading services to 2.5 million retail customers in 2027

National Bank of Israel will provide trading services for Bitcoin, Ethereum and Solana to retail customers. Galaxy Digital is responsible for executing transactions, while GK8 is responsible for hosting. The bank will calculate and withhold customers 'cryptocurrency taxes. The service is planned to launch in early 2027, but still needs to be approved by the Bank of Israel.

As Israel's largest commercial bank, National Bank of Israel has signed a cooperation agreement with Nasdaq-listed Galaxy Digital to allow its 2.5 million retail customers to buy, hold and sell cryptocurrency within the bank-owned apps. The target is to be launched in early 2027, and final approval is still pending by the Bank of Israel. Initially launched, the service covered three assets: Bitcoin, Ethereum and Solana. It has been four years since the bank tried the same business and was suspended.

The 2022 attempt failed due to a problem that no longer exists

In March 2022, National Bank of Israel announced a partnership with Paxos to establish a cryptocurrency trading platform and briefly became the first bank in Israel to commit to providing retail customers with digital asset access, but regulators suspended the plan. The problem is not technology or counterparties, but a lack of written rules that guide regulated banks on how to hold customer cryptocurrencies, how to handle deposits from exchanges, and how to capitalize for risk. A bank's compliance department will not act without rules. They only act when rules exist, even if they are strict, because strict rules can be displayed to auditors.

This set of rules will be formulated in the summer of 2026. The Bank of Israel has issued draft instructions that relax the way banks handle funds from licensed cryptocurrency service providers, removing the biggest obstacle Israeli customers have complained about in years-that deposits from exchanges are frozen or outright denied. In addition, the Capital Markets Authority divides capital thresholds based on functions. A company that never touches customer assets requires NIS 2 million in equity, a company that provides custody services requires NIS 2.5 million, and a custodian needs to hold an additional 0.25% of the total value of its custody assets. These equity stocks cannot exist in the form of cryptocurrencies, but can only exist in the form of cash, deposits or short-term government bonds. These numbers are demanding for start-up custodians, but for banks that work with Nasdaq-listed counterparties, they are just one item on the list.

Banks will withhold taxes on cryptocurrencies and customers do not need to declare themselves

The deal did not allow National Bank of Israel customers to receive better prices than global exchanges. The bank competes not on price spreads, but on cryptocurrency holdings that retail investors generally find uncomfortable: opening accounts with foreign entities, going through a separate KYC process, transferring shekels across borders, storing seed phrases, and compiling a year's transaction record for the Israel Revenue Authority.

The tax component is the most prominent highlight of this service. Currently, Israeli cryptocurrency investors need to calculate their own capital gains, track the cost base of each platform, and declare accordingly. The National Bank of Israel will withhold taxes at the source. For customers who do not make many transactions a year, this alone is enough to make them accept worse transaction prices, which the bank clearly knows well.

Maya Ravia, director of strategy at the National Bank of Israel, sees the move as a response to the increasingly becoming an integral part of the global financial system. From a business perspective, the statement describes a deposit retention strategy. Funds that leave banks and flow to exchanges will no longer generate fee income and will no longer be visible.

From suspended trading platform to launch in 2027

March 2022: National Bank of Israel announced cooperation with Paxos to conduct cryptocurrency transactions; regulators suspended the plan.
Summer 2026: The Bank of Israel drafts instructions on funds from licensed cryptocurrency providers.
Summer of 2026: The Capital Markets Authority sets the level of custody capital.
August 2026: National Bank of Israel and Galaxy announced cooperation.
Early 2027: Plan launch, subject to final approval from the Bank of Israel.

Local exchanges lose their only advantage

Local exchanges and brokers lose their main structural advantage-an advantage that has never been product quality, but shekel bank access. Once the country's largest bank sells the same three assets within an app already installed by 2.5 million people, smaller platforms will have to compete on asset breadth, pledges or fees that are difficult to withstand a balance sheet of this size. Habolim Bank and Discount Bank are also expected to respond, as for 30-year-old customers, banks that offer cryptocurrencies are significantly different products than banks that do not.

The same set of rules also explains why Galaxy was able to win this authorization. Israeli companies can only use foreign custodians operating under an accreditation regime, such as the UK FCA or the EU MiCA Framework, and responsibility remains with the Israeli entity, which must monitor assets on a daily basis and disclose accurately to customers who holds the assets and under what laws. GK8 was founded in Israel and owned by Galaxy, which makes the arrangement compliant without National Bank of Israel having to build its own custody services.

There is also one supply-side impact that has attracted less attention. This means that customer assets are still in the hands of foreign parents under Israel's technology stack, and the Capital Markets Authority's 0.25% fee applies to the value of the assets actually under custody and increases as the balance grows. If National Bank of Israel customers allocate assets in large quantities, the absolute value of the fee will increase, which is one of the details that determines whether the bank will vigorously promote the product or use it as a defensive project.

Galaxy has not disclosed its revenue sharing terms, and National Bank of Israel has not announced the fee standard customers will pay for each transaction. These two numbers will tell more about the seriousness of the move than the announcement itself, which is not expected to be announced until the product enters the testing phase.