"Deep concern": central bank and experts tear apart Netanyahu's crypto move

Israel’s Prime Minister Benjamin Netanyahu has ordered preparations for a parallel economic infrastructure using cryptocurrency and blockchain technology to circumvent potential international banking sanctions, a proposal that has triggered sharp condemnation from the central bank, top economists, and political rivals ahead of Tuesday’s parliamentary elections. In an interview with Channel 10’s economic network aired on Friday, Netanyahu stated that Israel must prepare for scenarios involving sanctions on its banking system. When asked directly if he referred to digital assets, he confirmed the intent to build a "bypass economy." He indicated that he had instructed advisors to draft plans for this alternative system. The Bank of Israel issued a formal rebuttal on Saturday, marking a rare instance of the institution criticizing the prime minister’s economic strategy. The central bank declared that cryptocurrencies cannot serve as a mechanism to evade sanctions. Instead, it advised that the appropriate course of action is to maintain robust economic relationships with major trading partners and focus on diplomatic efforts to prevent sanctions altogether. The bank emphasized that protecting the nation’s economic ties falls under the responsibility of the political leadership. Netanyahu responded to the central bank’s critique in a subsequent interview on Saturday, stating that while he heard the objections and thanked the bank for its advice, he would ultimately act according to his own judgment. More than 100 senior economists, business executives, and former public officials signed a letter expressing grave concern over the proposal. The group, identified as the Economists’ Forum for Democracy, described the plan as puzzling and warned that it knowingly leads Israel toward international economic isolation. Signatories include Nobel laureates Joel Mokyr and Aaron Ciechanover, former Bank of Israel Governor Jacob Frenkel, and former deputy governors Zvika Eckstein and Avia Spivak. The letter argued that comprehensive sanctions would inflict enormous and irreversible damage on the Israeli economy. It detailed specific consequences, including surging unemployment, the disappearance of foreign investment, and the collapse of Israel’s global economic standing. The authors noted that corporations, exporters, and the high-tech sector, which relies heavily on functional international bank connections, would be unable to operate. They further warned that ordinary citizens would face the inability to use credit cards, access international e-commerce platforms, and that foreign workers might leave the country due to restrictions on remittances. The healthcare system, they added, would struggle to procure necessary equipment and medications. Critics compared the potential fallout to the economic conditions in sanctioned states such as South Africa, Iran, and Russia, noting declines in living standards and reduced capacity to finance defense. Opposition leader Gadi Eisenkot, whose party leads recent polls against the current coalition, labeled the proposal madness. He warned that what he termed the BibiCoin policy could drive companies abroad and weaken national security. Other opposition figures accused Netanyahu of making alarming promises that undermine stability. The controversy arises amidst increasing diplomatic pressure on Israel regarding its settlement policies in the occupied West Bank and its military operations in Gaza. Several Western nations, including Britain, France, and Canada, have introduced measures targeting goods from Israeli settlements, though comprehensive restrictions on the Israeli banking system have not yet been implemented. Domestic tensions escalated following an attack in Hebron over the weekend, which resulted in casualties among Palestinians and Israeli soldiers. Netanyahu ordered the closure of checkpoints to Palestinian movement into Israel and the West Bank settlements for the duration of the election week. Right-wing Finance Minister Bezalel Smotrich ordered the demolition of Palestinian structures in Hebron near the site of the incident, including homes of families who witnessed the destruction. Anti-terrorism raids accompanied the demolitions, displacing residents. Vice-Mayor Khaled Fahd al-Qawasmi told Haaretz that more than 2,200 residents currently lack access to their homes. Protests erupted in Tel Aviv, where thousands gathered at the hostage square demanding accountability for the failures of October 7, 2023, when Hamas killed nearly 1,200 Israelis and took 250 hostages. Netanyahu has refused to permit an independent investigation commission into that day. Separately, media reports indicate a severe dispute between Netanyahu and Chief of Staff Eyal Zamir regarding potential military confrontation with Iran. Channel 12 reported that Zamir resisted orders from the political leadership that could rapidly escalate into conflict with Tehran. Military concerns exist that such a conflict might be exploited for electoral purposes. Zamir previously stated that the army aims to ensure democratic elections proceed without external interference and would not be provoked. Netanyahu dismissed the report of internal strife, claiming someone was attempting to stir up conflict and citing Iranian attempts to interfere in the elections to overthrow him. In Saudi Arabia, the military coalition led by Riyadh intercepted and destroyed a ballistic missile launched by Yemen’s Houthi rebels toward the capital. Hours after resuming flight operations at King Khalid International Airport, the Houthis claimed to have launched dozens of ballistic missiles in three separate attacks, stating they achieved their target. Saudi authorities did not immediately confirm the extent of the second wave of strikes. The parliamentary election takes place on Tuesday, with polls showing the opposition block narrowly ahead of the ruling coalition, though neither side holds a clear path to an absolute majority.