'Diplomatic and financial isolation': Netanyahu’s crypto plan to bypass sanctions draws rebuke

Israeli Prime Minister Benjamin Netanyahu has proposed exploring the use of cryptocurrency and blockchain technology to circumvent potential international banking sanctions, drawing immediate rebuke from the country’s central bank and a coalition of senior economists. The prime minister made the suggestion during an interview with Channel 10’s economic broadcaster, which aired on Friday, just days before Israel’s parliamentary election scheduled for October 27. Netanyahu stated that the government needed to prepare methods to evade banking sanctions through an alternative economic system. When asked directly if he referred to cryptocurrency, he confirmed the reference, adding that he was actively working on the issue. He also mentioned blockchain technology as another possibility and said he had instructed his advisers to draft a plan. The Bank of Israel issued a formal rejection of the proposal in a statement released on Saturday. The central bank warned that digital currencies cannot serve as a substitute for traditional economic relations with Israel’s primary trading partners. According to the bank, the appropriate course for the Israeli economy is to maintain existing commercial ties and focus on preventing sanctions rather than seeking technical workarounds. The institution emphasized that political leadership bears responsibility for protecting the country’s economic stability and urged the government to act to safeguard international economic connections. Following the central bank’s critique, Netanyahu addressed the objections in a separate interview on Saturday. He stated that he heard the criticisms and took them into consideration, thanking the Bank of Israel for its advice. However, he asserted that while he listens to counsel, he ultimately acts according to his own judgment. He clarified that cryptocurrency is merely one of several potential options being evaluated. The proposal triggered widespread criticism from opposition politicians, former financial officials, and academic experts. They argued that attempting to bypass international financial regulations could severely undermine investor confidence. Over 100 Israeli economists, business leaders, and former senior officials signed a joint letter expressing grave concern regarding the prime minister’s strategy. The group, identified as the Economists’ Forum for Democracy, included two Nobel Prize winners, former Bank of Israel Governor Jacob Frenkel, former deputy governors Zvika Eckstein and Avia Spivak, and former Finance Ministry directors general Avraham Ben-Bassat, David Brodet, and Yarom Ariav. Other signatories included Yair Avidan, former supervisor of banks, and Manuel Trajtenberg, former head of the National Economic Council. The signatories described the proposal as puzzling and warned that it leads Israel toward international economic boycott and isolation. They predicted that if broad international banking sanctions were implemented, the resulting damage would be tremendous and irreversible. The letter detailed specific economic consequences, stating that the banking sector, exporters, investors, and the high-tech industry would suffer significantly. The economists warned that unemployment would surge and foreign investment would vanish entirely, causing Israel’s global economic standing to collapse. The letter outlined practical impacts on daily life, noting that Israeli citizens might lose access to credit cards and international e-commerce platforms such as Amazon and AliExpress. It further warned that foreign workers would likely leave the country en masse because they would be unable to remit funds to their families. Additionally, the healthcare system would face difficulties procuring necessary medical equipment and medications. The authors cited South Africa, Iran, and Russia as examples of nations subjected to economic sanctions, noting that such measures lead to declines in living standards and reduce a state’s capacity to finance defense and protect itself against adversaries. Political opponents seized on the controversy ahead of the upcoming election. Opposition leader Yair Lapid accused Netanyahu of preparing for economic isolation rather than working to prevent it. Lapid stated on social media that the proposal belongs to nations like Iran, Russia, and Venezuela, describing them as countries whose banks are cut off from the world, whose companies cannot accept payments, and whose young people are fleeing. Avigdor Liberman, a former finance minister and leader of the Yisrael Beiteinu party, criticized Netanyahu for acknowledging the risk of economic isolation without providing a clear explanation of how he intended to prevent it. Gadi Eisenkot, Netanyahu’s main electoral rival, labeled the plan madness. He warned that what he termed the BibiCoin policy could drive companies abroad and weaken national security. The diplomatic backdrop for these remarks includes growing international criticism of settlement expansion and settler violence in the occupied West Bank. In September, the United Kingdom and eleven other countries imposed sanctions focused on the trade of goods from Israeli settlements. The UK announced bans on imports from these settlements, accompanied by targeted sanctions against individuals and companies that support or benefit from the settlements. France, Canada, and Spain have also indicated they will introduce or are considering similar sanctions against settlement goods. This environment of increasing diplomatic pressure coincides with the domestic debate over financial resilience and the potential for broader economic isolation.