Bank of Israel Rejects Netanyahu’s Crypto Proposal to Bypass Sanctions

The Bank of Israel has rejected Prime Minister Benjamin Netanyahu’s proposal to explore cryptocurrency as a way around potential international financial sanctions. The central bank said Israel should instead concentrate on preserving relationships with its principal trading partners and preventing restrictions that could damage the economy, Bitcoin.com News reported.

Netanyahu raised the possibility during a Friday interview with Israel’s Channel 10 economic network. He said the country needed contingency arrangements for possible banking sanctions and identified cryptocurrency and blockchain technology as options his advisers were examining, according to The Times of Israel.

The central bank’s response went beyond questioning a particular payment technology. Its statement placed responsibility on political leaders to prevent sanctions and safeguard economic ties, rather than treating alternative financial infrastructure as a substitute for those relationships.

Netanyahu subsequently acknowledged the criticism but did not abandon the broader idea. Bitcoin.com News reported that he said other tools besides cryptocurrency could help maintain access to the global financial system, while defending his economic record and his right to decide which approach to pursue.

The argument comes against a backdrop of restrictions directed at Israeli settlement activity. Reuters reported that Britain, France and Canada had announced plans the previous month to block imports from Israeli settlements in the West Bank. Those measures are distinct from the broader banking sanctions Netanyahu described as a possible future scenario.

Opposition politician Gadi Eisenkot challenged the practical implications for internationally connected businesses. As reported by The Times of Israel, he questioned how Israeli technology companies would collect overseas customer payments, attract foreign investment or complete acquisitions if transactions depended on bypassing international banks through cryptocurrency.

Other opposition figures disputed the assumption that digital assets offer an invisible financial channel. The Times of Israel reported that Avigdor Liberman pointed to the traceability of blockchain transactions and authorities’ ability to identify and block digital wallets associated with sanctioned entities. His criticism underscored the distinction between using different payment infrastructure and escaping financial restrictions.

The backlash also extended to economists. Reuters reported that more than 100 economists, including former central bank officials and Nobel laureates, signed a letter warning about the proposal. They argued that economic isolation could reduce foreign investment, increase unemployment and weaken the state’s ability to finance security.

Those warnings describe potential consequences rather than outcomes already established by the proposal. The immediate dispute concerns whether contingency payment arrangements could meaningfully protect an economy facing wider restrictions, with the central bank emphasizing prevention and critics focusing on the international relationships businesses require.

The next question is whether Netanyahu’s exploration produces a concrete policy proposal. The reports describe preparatory work rather than an operational alternative financial system, leaving its scope and implementation unresolved. For now, the Bank of Israel’s stated priority remains protecting trade relationships and avoiding sanctions rather than planning to circumvent them.