The origin of continuous energy spectra in large disordered interacting quantum systems is one of the key unsolved problems in quantum physics. Although small quantum systems with discrete energy levels are noiseless and stay coherent forever in the absence of any coupling to external world, most large-scale quantum systems are able to produce a thermal bath and excitation decay. This intrinsic decoherence is manifested by a broadening of energy levels, which aquire a finite width. The important question is: what is the driving force and the mechanism of transition(s) between these two types of many-body systems-with and without intrinsic decoherence? Here we address this question via the numerical study of energy-level statistics of a system of interacting spin-1/2 with random transverse fields. We present the first evidence for a well-defined quantum phase transition between domains of discrete and continous many-body spectra in such spin models, implying the appearance of novel insulating phases in the vicinity of the superconductor-insulator transition in InOx and similar materials.