In a short video, Adv. Doron Levy discusses how voluntary disclosure policies in Israel are increasingly focused on cryptocurrency. He explains that crypto operates within its financial ecosystem without traditional banking oversight, making monitoring transactions challenging for the Israel Tax Authority (ITA). With crypto values rising, the ITA is increasing efforts to ensure tax compliance within this emerging sector.
Levy notes that voluntary disclosure has been a tool to encourage taxpayers to declare previously unreported assets and income, but the rapid growth of the crypto market has complicated things. Unlike traditional financial assets, cryptocurrencies exist outside typical reporting channels, leaving regulators with limited visibility into transactions and holdings. As a result, Israel, like many countries, is working to adapt its policies to address the unique challenges the crypto world poses.
He also highlights that the anonymity and decentralization associated with cryptocurrencies have attracted many users, but this same appeal has posed risks for tax enforcement. With decentralized exchanges and peer-to-peer networks, traditional mechanisms that allow authorities to trace funds don’t apply, making it hard to enforce tax compliance. In response, the ITA has been proactively researching and investing in blockchain analytics tools to help trace these transactions.
