Israel, also known as the "Startup Nation," has carved out a niche as a world leader in cybersecurity, defense, and internet technology. Cryptocurrency has slotted in seamlessly to the high-tech environment and turned the digital asset class and blockchain technology into driving forces of the country's economic growth.
Exchanges operating in the country have seen an increase in wallet downloads and crypto activity. In 2023, just 1.24% of Israelis owned cryptocurrency, but that figure is now 7.3%. Both internal and global regulatory and technological innovations are pouring more fuel on the fire of Israel’s booming crypto startup ecosystem.
Bitcoin ETFs Changed the Game
In January 2024, after the Securities & Exchange Commission approved multiple Bitcoin ETFs in the US, the global crypto market experienced a 70% price surge that brought more than $11 billion into the crypto space. In November 2024, BTC ETF options were launched for US markets which further drove retail and institutional investor inflows into the crypto markets. This in turn helped to drive the crypto bullrun for crypto markets worldwide.
Binance CEO Richard Teng commented on the effects of options trading on crypto markets, “While uncertainty always accompanies innovation, the alignment of traditional and crypto markets through tools like options suggests a maturing landscape. These developments are a response to existing demand but also a catalyst for new opportunities. It is reasonable to expect that products like BTC ETF options will play a significant role in sustaining and accelerating the momentum of digital assets.” This additional catalyst for the crypto markets only fueled opportunities for new innovative technology, with Israeli start-ups also contributing to this growing landscape.
Remarkably, the high-tech sector provides 20% of Israel's entire economic output and 53% of its exports. More than 600 startups took off in 2023, according to the Israel Innovation Authority. One in six of them are climate tech startups, which demonstrates the country's resolve to use technology to effect profound change on the world at large. Other intriguing companies to make Israel their home include a Superconductor manufacturer with grand plans for global dominance.
The crypto ecosystem in Israel includes the likes of Blockaid, Ingonyama, Tres, Oobit and Fordefi. In January 2024, Israel was home to 24 "unicorns". These are private companies valued at more than $1 billion. Then there's Starkware, a leader in the Ethereum scaling space, which has hit a $20 billion valuation following the launch of the $STARK token.
In one recent annual survey, Tel Aviv was voted the fifth most attractive startup ecosystem in the world. With cutting-edge companies looking to base themselves in Israel, despite the geopolitical uncertainty, it's inevitable that the crypto community continues to grow. These are crypto people, after all.
Integration with the Tech Startup Scene
Israel has always supported the tech industries, and it was inevitable that the blockchain would find a home here. The country is steeped in education, research, and development and is relatively loaded with tech talent.
In military intelligence, they have found an unlikely ally that has helped to nurture tech entrepreneurs and facilitate their crypto plays. Unit 8200 is deeply entrenched with the crypto community, and its alumni have joined and founded successful startups, bringing government connections, deep knowledge of cybersecurity, and a rounded tech education to the blockchain. The Mamram Blockchain Incubator is also affiliated with the IDF's Centre of Computing and Information Systems.
This unique synergy between the tech startup scene, one of the most technically advanced military forces in the world, and the crypto crowd has brought a wave of foreign investment. In the second quarter of 2024, Israeli startups broke their two-year record by raising more than $2.9 billion against a backdrop of international conflict and heightening tensions with neighboring countries. That was no mean feat, although $965 million came in one hit during a funding round by cybersecurity firm Wiz.
Government-Backed Tech Revolution
Israel's government has played its own part in the digital revolution and has twice publicly experimented with one of the world's first Central Bank Digital Coins (CBDC). In 2021, the country unveiled the first prototype of the Digital Shekel, and more recently, the Bank of Israel announced a Digital Shekel Challenge to explore potential applications of the CBDC.
At the same time, the country is investing in supercomputer technology to fight for honors in the Artificial Intelligence arms race and maintain its position at the top table of the tech start-up scene.
Israel continues to punch well above its weight on the international tech stage thanks to business-friendly regulations, a convergence of talent, and a community of innovators. This ecosystem hasn't even truly matured yet. There is a lot more to come, and crypto and Web3 technology will likely be the driving forces behind Israel's next big tech breakthrough.
This article was written in cooperation with Craig Lebrau