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The Crypto Landscape In Israel

Sergei Tokmakov, Pixbay Free for commercial use; No attribution required (CC0)
Cryptocurrency - Pixbay

The popularity surrounding blockchain technology, cryptocurrency, and digital assets has taken up home in Israel, as widespread adoption from both private and institutional investors has soared over the last few years. 

For the most part, Israelis’ fascination surrounding blockchain technology and cryptocurrencies have caught the attention of thousands of investors, with the number of crypto investors and traders making up a mere 1.27% of the general population. 

Even though individual sentiment for crypto is still somewhat in its infancy, like the rest of the global market, blockchain companies, those either developing the technology or tools to host and support crypto-related transactions, have increased by more than 32% in 2019 alone. 

By the end of 2021, venture capital investment in cryptocurrency companies based in Israel marked more than USD 1 billion in VC funding raised, far surpassing the peak of 2018 which saw a mere USD 206 million raised. 

While Israel might not share a majority stake in the global crypto world, seeing countries such as India, the United States, Vietnam, the United Kingdom, and Nigeria, among others, have major widespread adoption, with the Central African Republic becoming the second country, after El Salvador to adopt Bitcoin as its official legal currency – authoritative development and innovation still play a key role in Israel’s place among other major contenders. 

For those investors who have witnessed an opportunity when it comes to crypto – Israel, albeit not a hotbed for crypto, but perhaps blockchain technology startups and unicorns – is fast catching the attention of some key global influences, growing the local market and helping to set forth a new generation of decentralized finance (DeFi) service providers. 

Yet, some speculate that Israeli tech talent has been slow catching up with the advancements of blockchain and crypto on the global stage, leaving the country falling behind, and lacking growth. 

The road leading up to this point has been anything but easy, and for the startup entrepreneurs headlining these ventures, establishing a name for themselves among a population where digital crypto has yet caught on has enabled them to reach an untapped market filled with potential, and fueled by a sector embracing tech-driven innovation. 

But can intervention from the public and private market spark rapid expansion, or is it possible that the country once dubbed as the “Startup Nation” is now trailing further behind in the race towards crypto innovation? 

A look at the current situation 

Looking at how far we have already come, it’s quite remarkable to consider that just a few years ago, cryptocurrency, or even blockchain for that matter, was almost unknown in Israel. 

With the introduction of digital assets, accompanied by Web 3.0, and DeFi, a new market of investors was born almost overnight. 

Recent data polled by Gemini surveyed 1,200 people in both Israel and Emirates and found that 28% in Israel own crypto, with 51% of respondents being female. 

Although the report only covers a small portion of the general population, it can serve as a clear indication of how quickly cryptocurrencies have taken hold of some private and retail investors. 

Besides the fact that local residents are taking a liking to the purchase and trade of crypto, as it offers to act as a hedge against inflation in unruly economic conditions, the most significant is still found in the soaring rate at which investors are pouring millions into Israeli-based blockchain and crypto-related startups. 

Between 2020 and 2021, funding for fintech-related companies and startups increased by more than 136%, totaling around USD 4.5 billion in total investment funding. 

As interest from VC investors grew, local adoption efforts have also been expanding, with Bank Leumi becoming the first traditional Israeli bank to allow the trading of crypto with its digital platform Pepper Invest after partnering with the U.S-based blockchain firm, Paxos. 

The current environment allows both entrepreneurs and investors to combine innovative efforts which look to help put Israeli-based blockchain and crypto startups on the global map. 

The Opportunity for Expansion 

Considering how far the blockchain and crypto industry has come in such a short period, recent indicators have found that Israel has the most Unicorn startups, those valued at over USD 1 billion per capita. 

Although these startups range, the premise of blockchain and cryptocurrency in the country is still a growing topic that has garnered the interest of high-profile institutional investors. 

Here’s a look at some of the most innovative blockchain and crypto startups that have helped push crypto into a new sphere of modernization and development in Israel. 

StarkWare Industries 

After a Series B funding round of more than USD 75 million, Netanya-based blockchain startup StarkWare recently finished off a Series C funding round of USD 50 million led by Sequoia Capital. 

The current valuation for StarkWare is more than USD 2 billion, as the company looks to develop tools and features that assist with the production of blockchain technologies and consumer-enabled services. The company is now set for a USD 6 billion valuation. 

Fireblocks 

Perhaps considered to be one of the most notable Israeli startups, Fireblocks has raised more than USD 1 billion through five funding rounds. 

With a high-end list of backers and investors, Fireblocks is now heading for a USD 8 billion evaluation, as the market for tech-based tools and crypto-related programs expands across the world. 

Fireblocks main focus lies within security protocols for exchanging, transferring and issuing of digital assets.

SCRT Labs

Earlier this year, SCRT Labs made major headlines as the company behind the development and deployment of the multi-layer blockchain ecosystem the Secret Network. 

While the company saw more than USD 400 million in two separate investment initiatives, the Secret Network was more well-known for the launch of the Quentin Tarantino-issued NFT collection, Legendao.  

The rapid investment opportunities have allowed the Secret Network to become an important part of the Web 3.0 development process, acting as a major data privacy hub for users of the DeFi network. 

Blox

While Blox was acquired by Lukka back in October 2021, the startup is considered as one of the world’s leading platforms for crypto accounting and bookkeeping.  

So far the adoption of Blox has enabled accounting firms and finance teams to better control crypto accounting. 

Blox has undergone multiple funding rounds, raising more than $30 million in funding. The Blox software has been a major contributor to the advancement of blockchain-based financial software.  

Celsius Network 

In a recent Series B funding round between October and November 2021, Celsius Network raised more than USD 750 million, putting the company valuation at more than USD 3 billion as of 2021. 

Celsius currently has more than 1.7 million active users, acting as one of the world’s leading blockchain-based lending platforms. Users can access tools and services offered by Celcius via a free mobile app to apply for crypto loans, conduct payments, and grow their loyalty points. 

Conclusion

While these companies represent a small percentage of the underlying activity in the Israeli blockchain and crypto industry, it’s already quite clear how millions of venture capital is being directed towards the fast-track innovation and development of related technology and software. 

For investors, this is perhaps the perfect time, and place to echo their support for the transition into the digital economy, as Israeli crypto investors take a more solid form. 

Between blockchain, crypto, and web 3.0, these companies are helping to reshape the next generation of investors, as Israeli looks to place itself among major-league competitors trailing a new era of crypto development in a country ripe with opportunity. 

About the Author
I am the founder and CEO of ValueWalk - a popular financial information company. Before launching ValueWalk, I was first an equity analyst at a micro-cap focused private equity firm and then moved to a small/mid-cap value-focused research shop. I also have experience working in business development for hedge funds. I live with my wife and four kids in Passaic, New Jersey.
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