The Bank of Israel has rejected Prime Minister Benjamin Netanyahu's suggestion that cryptocurrency could help Israel avoid potential banking sanctions. Its warning comes as 109 economists, business leaders and former officials challenge the plan ahead of the October 27 election.
Bank of Israel Rejects Cryptocurrency as Sanctions Workaround
The central bank said on October 24 that cryptocurrencies could not provide a route around sanctions targeting Israel. It urged the government to protect economic ties with major trading partners rather than prepare ways to bypass restrictions.
"Cryptocurrencies cannot serve as a means of circumventing sanctions," the Bank of Israel said. It argued that preventing sanctions and limiting damage to the economy remain the responsibility of Israel's political leadership.
The statement followed Netanyahu's comments about building an alternative financial system. The bank did not announce a new cryptocurrency policy or describe any change to its oversight of digital assets.
Netanyahu Says Blockchain Could Help Israel Bypass Sanctions
During an October 23 interview with Channel 10, Netanyahu raised the possibility of banking sanctions against Israel. He said he had requested a plan for an alternative system that could operate if restrictions affected international payments.
Asked whether blockchain could form part of that approach, Netanyahu replied, "One of them, certainly." He did not outline how the system would work or identify which cryptocurrencies the government might use.
After the central bank's response, Netanyahu told Channel 14 he would consider its criticism. However, he said cryptocurrency was only one possible option and that officials had not decided whether to use it.
109 Economists Warn of Damage from Possible Banking Sanctions
A letter published October 25 carried the signatures of 109 Israeli economists, business executives and former officials. The group warned that broad international banking sanctions could cause lasting economic damage and rejected cryptocurrency as an adequate replacement for established financial links.
Signatories included Nobel laureates Joel Mokyr and Aaron Ciechanover, former Bank of Israel Governor Jacob Frenkel and former senior Finance Ministry officials. Technology founders and venture capital executives joined the appeal.
The letter warned that comprehensive restrictions could prevent Israelis from using credit cards or accessing international shopping platforms. The signatories said banks could lose connections with foreign partners, while hospitals could struggle to buy equipment and medicines.
The group said foreign workers could face difficulties sending wages to their families if banks lost access to international money transfer services.
They described the proposed crypto workaround as a solution associated with "criminal organizations." Their predictions focused on a broad banking shutdown, not the restrictions already imposed.
Israel Faces Growing Sanctions Debate Ahead of October Election
The dispute follows a September 8 statement in which 12 countries, including Britain, France and Canada, announced plans to introduce, consider or support measures against Israeli settlement activity in the occupied West Bank. The governments focused on restrictions on trade in settlement goods rather than a blanket ban on Israeli banking.
Opposition leader Yair Lapid criticized Netanyahu's proposal, arguing that relying on ways around sanctions would place Israel alongside economically isolated countries. Former Finance Minister Avigdor Liberman called for diplomatic steps to prevent restrictions.
Israel's parliamentary election is scheduled for October 27. Netanyahu has defended preparations for possible sanctions while acknowledging the central bank's objections. The government has not released a detailed plan for a blockchain-based payment system.
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