Bank of Israel rejects Netanyahu’s crypto idea to counter possible sanctions

The Bank of Israel has publicly rejected Prime Minister Benjamin Netanyahu’s suggestion that cryptocurrency could help Israel withstand possible banking sanctions.

On October 24, 2026, the day after Netanyahu discussed the idea on Channel 10, the central bank said crypto cannot circumvent sanctions. On October 25, more than 100 economists, business executives and former officials, including former governor Jacob Frenkel, warned of economic isolation.

Bank of Israel rejects Netanyahu’s cryptocurrency proposal

The Bank of Israel’s response was unusually direct, challenging the prime minister’s suggestion that digital assets could help the country maintain economic activity if international banking restrictions were imposed.

In its statement, the central bank said cryptocurrencies could not serve as a means of circumventing sanctions and urged the government to concentrate on preserving Israel’s economic relationships with its principal trading partners.

“The right course for Israel’s economy is to maintain our economic relationships with our main trading partners and focus on preventing sanctions and their negative impact on the economy,” the bank said.

It added that preventing such restrictions was the responsibility of the country’s political leadership.

The statement placed the emphasis on diplomacy and economic policy rather than on developing alternative payment mechanisms. It also highlighted the distinction between using blockchain technology for legitimate financial purposes and attempting to use it to overcome restrictions imposed by foreign governments.

Netanyahu defended his position when responding to the criticism in a subsequent interview.

“I hear the resistance; I am taking it into account,” he said, thanking the central bank for its advice while adding that he would continue to make decisions he considered appropriate.

His response did not amount to a withdrawal of the proposal, leaving open the question of whether the government would pursue the idea.

Economists warn of economic isolation and investment losses

The central bank’s intervention was followed by a broader warning from 109 economists, business executives and former public officials who expressed concern about Netanyahu’s remarks and the prospect of sanctions affecting Israel’s banking system.

The group argued that restrictions on international financial relationships could have consequences extending far beyond cryptocurrency markets, potentially disrupting businesses, investment and ordinary economic activity.

Among the risks identified were rising unemployment, a sharp decline in foreign investment and damage to Israel’s international economic standing.

The signatories also warned that sanctions affecting banks could make it more difficult for Israeli businesses to receive international payments, obtain financing and maintain commercial relationships with overseas partners.

Consumers could face disruption to international payment services and online shopping, while restrictions on financial transfers could affect foreign workers sending money to relatives abroad. The group also raised concerns about the ability of healthcare providers to obtain medical equipment and medicines.

Drawing comparisons with countries that have experienced extensive economic sanctions, including Iran, Russia and South Africa under apartheid, the economists warned that prolonged financial isolation could lower living standards and weaken the state’s ability to finance national security.

Their intervention broadened the dispute from a question about cryptocurrency’s capabilities into a debate over the potential economic consequences of policies that could further isolate Israel from international markets.

The group described Netanyahu’s proposed response as ineffective and argued that the government should work to prevent sanctions rather than prepare to circumvent them.

Opposition leaders call the proposal a threat to national security

Netanyahu’s political opponents also seized on the proposal, arguing that it could undermine the economy the prime minister says he wants to protect.

Gadi Eisenkot, leader of the Yashar party and one of Netanyahu’s principal electoral rivals, described the proposal as a threat to national security.

Eisenkot used the term “BibiCoin vision” to criticise the suggestion that cryptocurrency could serve as a workaround for international financial restrictions.

He argued that an economy dependent on international technology companies, investors and commercial relationships could not easily replace those connections with alternative payment systems.

Eisenkot questioned how Israeli technology companies would secure foreign investment or receive payments from international customers if they were expected to operate outside established banking channels.

He also warned that the proposed approach could encourage businesses and investors to move their operations elsewhere, with consequences for employment, public services and national security.

Naftali Bennett, another opposition figure, criticised what he characterised as a vision of Israel becoming economically isolated from the rest of the world.

Avigdor Liberman, leader of Yisrael Beytenu, raised a different objection, arguing that cryptocurrency transactions are not necessarily hidden from regulators. He also accused Netanyahu of previously obstructing efforts to advance domestic cryptocurrency regulation while now presenting digital assets as a potential solution to an international financial crisis.

Opposition leader Yair Lapid similarly condemned the proposal, warning that the country could face severe economic consequences if its international relationships deteriorated further.

The criticism has therefore come from multiple directions, combining concerns about financial regulation with broader disagreements over the government’s economic and diplomatic policies.

Why cryptocurrency may not shield Israel from sanctions

At the centre of the dispute is whether blockchain-based payments could meaningfully protect Israel’s economy if foreign governments imposed restrictions on its banks.

Cryptocurrencies can facilitate transfers without relying on every stage of the traditional correspondent banking system. However, that capability does not eliminate the legal, commercial and operational restrictions that sanctions can impose.

Businesses still need willing customers, suppliers, exchanges and payment providers. Converting digital assets into conventional currencies, accessing banking services and completing international commercial transactions can also involve intermediaries subject to sanctions requirements.

Blockchain transactions may also leave publicly accessible records that allow investigators to trace funds and identify relationships between wallets. Some digital-asset services can freeze or restrict funds when legally required or when their contractual and compliance arrangements permit it.

Consequently, using cryptocurrency does not automatically make a transaction lawful or guarantee that a sanctioned individual, company or country can maintain access to international markets.

The central bank’s objection is not that blockchain technology has no legitimate economic uses. Rather, it is that digital assets cannot replace the wider financial and commercial relationships on which Israel depends.

Netanyahu’s proposal also faces questions about its practical implementation. Although he said he had requested a plan for an alternative financial framework, Israeli media reported that officials in the Finance Ministry and the Prime Minister’s Office were unaware of an operational initiative.

That uncertainty adds another dimension to the controversy: the proposal has attracted significant political and economic opposition before a clearly defined implementation plan has been publicly established.

The dispute comes amid growing international criticism of Israeli settlement policies in the occupied West Bank. Britain, France and Canada have announced measures targeting imports from Israeli settlements, adding to concerns about the country’s relationships with some traditional allies.

The measures targeting settlements are distinct from comprehensive sanctions against Israel’s banking system, which Netanyahu raised as a possible future scenario. The broader financial restrictions discussed by the prime minister have not been established by these developments alone.