Israel has built one of the world's most sophisticated startup ecosystems, and the country is now positioning itself as a blockchain powerhouse. The nation's success in software, communications, and l
Israel has built one of the world's most sophisticated startup ecosystems, and the country is now positioning itself as a blockchain powerhouse. The nation's success in software, communications, and life sciences has drawn comparisons to Silicon Valley. Israel earned the designation Startup Nation through concrete metrics: highest startup density per capita globally, 10th place in the 2018 Bloomberg Innovation Index, and first in the world for research and development spending as a percentage of GDP.
Yaniv Altschuler, CEO of blockchain startup Endor and MIT researcher, explained the environment to MiningPool. "Israel boasts a warm, receptive, and supportive environment for startups. The result of the vibrant and healthy ecosystem is that an extraordinary amount of successful tech companies has been founded in Israel, such as ICQ, Wix, and Waze. The culture fosters innovative thinking, where people are always being pushed to invent the next way of making life easier, faster, and more efficient."
The country's technical foundation in cryptography, fintech, and cybersecurity, combined with welcoming regulators, has accelerated its emergence as a blockchain hub. Israel also maintains a large concentration of engineers and scientists accustomed to collaborative environments and entrepreneurial pursuits. By early 2018, Israel housed 88 blockchain and crypto startups. Fintech accounted for 39 percent. Enterprise and cloud computing comprised 22 percent. Social media represented 21 percent. Infrastructure and protocol development made up 13 percent, according to Daniel Peled, president and co-founder of Orbs, a Tel Aviv company building a hybrid blockchain with interoperability features for base-layer protocols such as Ethereum.
The country has generated major ICOs including KIN, Endor, Sirin Labs, and Orbs. Peled noted the growing involvement of financial sectors, which have been slow to embrace new technologies. He highlighted the Israel Securities Authority's interim report on ICO regulation from March 19 as significant. "Like other market participants, we had the opportunity to meet and discuss issues with the ISA as they prepared their research. They actually did an amazing job of researching, understanding, and summarizing both the crypto space and the approaches adopted in various jurisdictions around the world. It is also very clear from that report, and our own discussions with ISA committee members, that they are not out to kill the market, but are looking to strike the right balance between allowing crypto business to flourish within Israel and protecting token/cryptocurrency holders' rights."
Large Israeli banks and corporations have begun experimenting with blockchain. In 2017, Bank Hapoalim joined with Microsoft to develop digital bank guarantees using blockchain. Microsoft has since partnered with Blockchain Israel to launch the Israel Blockchain Academy, aimed at senior executives and developers seeking deeper blockchain knowledge. Major corporations including Accenture and Intel have supported these initiatives.
Orbs operates alongside sister company Hexa Labs, which helps firms integrate blockchain into their systems or launch experimental blockchain projects. The two entities, part of Hexa Group, partner with Ground X (Kakao's blockchain subsidiary), South Korea's Gyeongsangbuk-do province, and Endor. Endor merges blockchain technology with Social Physics, AI, and big data to forecast behavioral patterns. The startup serves clients such as Walmart and Coca-Cola, and provides predictive analytics to Leumi Card, Israel's leading credit card company.
But Israel lags Asia in blockchain adoption. Peled observed that Korea, China, and Japan possess deep mobile payment cultures making blockchain integration more natural. "Korea, China and Japan, for example, have a culture of mobile payments that is years ahead of the West, which makes a transition into a blockchain backed economy smoother and more natural. In Korea, for example, we see corporate giants like Kakao, T-MON, Line, and more who already have committed substantial resources into realizing a vision of integrating blockchain technology and crypto-economic models. They are the real drivers of adoption and in my view, are the reason the 'blockchain nation' will come out of Asia. Israel should be doing more to educate the public; consumers still only have a vague idea of what is cryptocurrency and what can be done with it, and how it can affect their lives."
Both Peled and Altschuler identified education and regulation as key obstacles. The Hexa Foundation, the nonprofit arm of Peled's operations, focuses on teaching Israeli markets, regulators, and policymakers. Its consulting arm, Hexa Labs, advises local banks and corporations on blockchain applications. Peled said regulators have engaged constructively but significant work remains. Altschuler pointed to two regulatory constraints: the Central Bank classifies Bitcoin as a security subject to securities taxation, and the Tel Aviv Stock Exchange prohibits cryptocurrency trading. "While regulation provides certainty, it can also lead to such challenges."
