Background and Applicability
On July 19, 2026, the Capital Market, Insurance and Savings Authority (“CMA“) published the final and binding versions of two circulars concerning activity in financial assets, particularly those involving virtual currencies:
- The “Financial Asset Custody Provisions” Circular, applicable to financial service providers licensed to provide a service in a financial asset and who hold financial assets in custody;
- The Capital Requirements for Virtual Assets Service Providers Circular
Key Points of the Financial Asset Custody Circular
- Corporate governance and custody officer: The board of directors is required to approve a custody policy at least once a year. The license holder must appoint a custody officer from among its officers, excluding directors, to implement the policy and oversee it on an ongoing basis.
- “Custody policy based on best practices”: The custody policy must be based on evolving industry best practices rather than a closed list of technological requirements. The circular provides a non-exhaustive list of examples, including multi-signature wallets, HSMs, segregation between hot and cold wallets, whitelisting, a “four-eyes” mechanism, real-time monitoring, and backups.
- Segregation of assets and trust: Client assets must be held in a dedicated account, separate from the license holder’s own assets, in trust for the clients’ benefit. Client assets may not be used except for custody purposes.
- Recording and documentation: The license holder must maintain a daily register of client assets. For a stable virtual currency (stablecoin), value must be recorded by reference to the underlying pegged asset.
- Online personal area: A license holder engaged in custody of virtual currencies must provide clients, free of charge, with an online personal area showing up-to-date information on their assets and completed transactions.
- Independent accountant: An independent accountant must conduct a quarterly review of asset segregation and register reconciliation. Any failure or material risk must be reported in writing to the CEO, who must respond within the timeframe set in the notice; both the accountant’s notice and the CEO’s response must then be forwarded to the board of directors and the Supervisor.
- Outsourced custody: A license holder may deposit financial assets with an outsourced custodian, subject to eligibility requirements including appropriate experience and technology, and operational and financial capability. For virtual currencies, an eligible outsourced custodian also includes a holder of a custody license in New York, in England under FCA supervision, or in a MiCA-regulated country. The final version removed the draft preference for banking corporations and institutional entities to serve as outsourced custodians without specific virtual-currency experience.
- Reporting to the Supervisor: The license holder must immediately report to the Supervisor any unusual events or material failures relating to custody of client assets.
Key Points of the Additional Capital Requirement Circular
- A total capital requirement of NIS 2 million for entities that do not provide custody services, or NIS 2.5 million for entities that provide custody services.
- Proportional component: In addition to the base amount, additional capital is required at a rate of 0.25% of the total value of client assets held in custody, as measured on December 31 of the preceding year.
- Mid-year update mechanism: If the value of client assets held in custody changes by more than 50% compared with the most recent measurement, the license holder must adjust its capital by June 30 of that year.
- Composition of capital: The requirement to hold capital solely in liquid, low-risk assets (cash and cash equivalents, bank deposits, and short-term government bonds) applies specifically to the additional capital required under this circular (beyond the statutory minimum capital required under Section 37 of the Supervision Law) and not to the total capital requirement as a whole.
- Internal risk management model: The license holder must establish a risk management policy and model for managing its total capital, including an ongoing assessment of exposures and a corresponding adjustment of capital.
Summary
The published circulars are the final, binding outcome of a regulatory process that began in 2022 and will take effect six months after publication, approximately January 2027. They reflect a shift from a detailed, quantitative-normative regime to a more flexible, risk-based framework, including the removal of quantitative limits, simplification of eligible custodian categories, adoption of a best-practices technology approach, and a less stringent insurance requirement. At the same time, the CMA requires the license holder to comply with core obligations, such as the duty of trust, segregation of assets, corporate governance, appointment of a custody officer, independent accountant review, and reporting to the Supervisor, while also adding new requirements such as an online “personal area,” an internal risk management model, and a new equity capital formula based on assets under management (AUM). License holders providing virtual currency services should prepare operationally and financially for implementation by the effective date.
We invite clients operating in the field of virtual currencies and financial assets to examine the implications of the final circulars for their operational and capital preparedness ahead of the effective date. Our Firm’s team is available to assist in analyzing the specific requirements, identifying gaps in their current situation, and supporting the necessary preparation process.
The above content is a summary provided for informational purposes only and does not constitute legal advice. It should not be relied upon without obtaining further professional legal counsel.
