The Bank of Israel has just publicly rejected Benjamin Netanyahu’s crypto project. On October 24, the institution affirmed that cryptocurrencies would not allow the country to circumvent possible international financial sanctions. The Prime Minister had, however, requested the preparation of a system based on blockchain. More than 100 economists also denounce this proposal, which comes a few days before the Israeli legislative elections on October 27.
In brief
- The Bank of Israel rejects the use of crypto to circumvent possible financial sanctions.
- Netanyahu maintains this option, without confirming its implementation.
- More than 100 economists are warning about the economic risks of the project.
Bank of Israel rejects Netanyahu’s crypto plan
The disagreement is now public. Friday October 23, Netanyahu explained that Israel must prepare an economy capable of functioning despite possible international banking sanctions. In particular, he asked his advisors to develop a plan based on blockchain.
The Bank of Israel responded the next day. In a particularly direct statement, she asserts that cryptocurrencies are not a way to circumvent sanctions. The institution instead recommends that the government preserve economic relations with its main trading partners.
The development comes after new restrictions announced by several Western countries against products from Israeli settlements in the West Bank. These targeted measures, however, do not correspond to the general banking sanctions feared by Netanyahu.
The Prime Minister does not intend to abandon his idea. Asked on Saturday evening, he thanked the central bank for its advice, while affirming that he would take the decisions he considers necessary. He clarified that crypto was only one option among several and would not necessarily be used.
For now, no blockchain network, no crypto and no official timeline have been announced. According to Ynet, several Israeli economic officials say they are not even aware of a team actually working on this project.
Crypto can bypass some blocks, not all sanctions
The position of the central bank deserves some clarification. A Bitcoin or Ethereum transaction can be executed without going directly through a traditional bank. Two companies can also use stablecoins for certain international settlements.
However, these operations remain traceable on public blockchains. Exchanges, partner banks and stablecoin issuers also apply compliance rules.
The Iranian example illustrates both aspects of the problem. In September, a US Senate investigation revealed that 84% of 846 crypto wallets sanctioned or targeted for seizure for their ties to Iran had used USDT exclusively, or almost exclusively.
The report describes a major payments network used despite US financial restrictions. Tether, however, claims to have contributed to the freezing of nearly $550 million in USDT linked to Iran in 2026.
Crypto transfers can therefore continue despite certain banking restrictions. They do not automatically protect their users from sanctions, fund freezes or refusals from their commercial partners.
For Israel, another problem would remain: a foreign company can always refuse a contract, an investment or a delivery, even when the proposed payment goes through blockchain. Changing currency is not enough to maintain a business relationship.
More than 100 economists warn of the consequences
The reaction of the Bank of Israel is not isolated. On Sunday, October 25, more than 100 economists and economic leaders signed a letter expressing their concerns. They include former central bank officials, former governor Jacob Frenkel and several Nobel laureates.
In particular, they fear a decline in foreign investment, an increase in unemployment and difficulties for Israeli companies dependent on international markets. Gadi Eisenkot, Netanyahu’s main opponent in the election, also disputed the proposal. He believes that an economy based on parallel financial circuits would risk weakening the country’s commercial relations.
The technology sector would be particularly exposed, according to these critics. Israeli businesses need foreign investors, banking partners and international clients. A crypto infrastructure would not necessarily replace these relationships.
However, the debate comes at a time when Israeli banks are already developing certain services linked to digital assets. In August, Bank Leumi announced a partnership with Galaxy Digital to offer Bitcoin, Ethereum and Solana to its customers from 2027. Crypto is therefore also progressing in the traditional Israeli financial system. Netanyahu now wants to explore its use as a back-up to possible sanctions. The Bank of Israel considers this approach insufficient to protect the national economy. On the eve of the October 27 elections, the disagreement remains unresolved. No operational plan has yet been presented.
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