Insurance companies and investment houses might be required to detail and justify any investments linked to bitcoin.
The Israeli Bitcoin Association is opposing the proposed reporting requirement, calling it discriminatory.
Dozens of Israelis who own digital currencies have recently received notification telling them they must fully disclose their assets for taxation purposes.
The draft bill would define bitcoin and other cryptos as "currency" instead of an "asset" for tax purposes.
Crypto startups are hitting a snag when it comes to Israeli banks.
Israel has confirmed that it will treat cryptocurrencies as taxable assets in a new circular published on Monday.
Israel's government has published draft circular outlining possible approaches to taxing the proceeds of initial coin offerings (ICOs).