Netanyahu Faces Backlash Over Proposal to Use Crypto to Bypass Sanctions

Israeli Prime Minister Benjamin Netanyahu drew rebukes from the Bank of Israel and more than 100 economists over the weekend after suggesting cryptocurrency could help Israel get around international sanctions.

Netanyahu raised the idea in an interview with Channel 10 on Friday. He said Israel should prepare an alternative economic system and pointed to currencies that can bypass sanctions. Asked whether blockchain technology was one option for bypassing sanctions, he said it was and that he had already ordered a plan.

No country has imposed sanctions on Israel’s banks. Britain moved in September to ban imports of goods from Israeli settlements in the West Bank, acting jointly with France and Canada. The Bank of Israel’s staff forecast on Wednesday flagged a risk of increased sanctions against Israel by various countries.

Central Bank and Opposition Push Back

The central bank responded in a statement on Saturday evening, saying Israel’s economy is best served by keeping its relationships with its main trading partners and working to prevent sanctions. It added that this task belongs to the political leadership.

Netanyahu answered in an interview with Channel 14 the same day. 

I thank the Bank of Israel for its advice, but I do what I think is right.

Israeli Prime Minister Benjamin Netanyahu

He also said he had heard the resistance to the idea and was taking it into account.

In a post on X, Yashar party leader Gadi Eisenkot called the plan a threat to national security. He asked how an Israeli tech company with customers overseas would receive payments or foreign investment.

Yisrael Beytenu leader Avigdor Liberman noted that blockchain transactions can be traced. In September, the US Treasury sanctioned Tehran-based exchange BitBank over alleged Bitcoin transfers to Iran’s Islamic Revolutionary Guard Corps. 

In June, the Treasury said the US had seized about US$1 billion (AU$1.42 billion) in Iranian crypto assets.

Read more: Switzerland Approves First Retail Bitcoin ETF Under Domestic Fund Rules

Economists Warn of Isolation

On Sunday, two days before the national election, 109 economists, business leaders and former senior officials issued a letter warning that banking sanctions would cause Israel irreparable damage. The signatories include former Bank of Israel governor Jacob Frenkel and Nobel laureates Joel Mokyr and Aaron Ciechanover.

The letter, organised by the Economists’ Forum for Democracy, said Israelis could lose the use of their credit cards and access to shopping sites such as Amazon and AliExpress. It warned that foreign workers would leave and that the health system would struggle to buy medicines.

The signatories called the crypto proposal bizarre and said it would be of no use. They likened it to methods used by criminal organisations and accused Netanyahu of knowingly steering Israel towards boycott and economic isolation.

Read more: Bitwise and Hyperliquid Push SEC for Clearer Crypto Rules as Consultation Closes