Bank of Israel rebukes Netanyahu’s idea of using crypto to shield the economy from sanctions

Prime Minister Benjamin Netanyahu has suggested that Israel could use cryptocurrency to help shield its economy from potential international sanctions^2,4.

The Bank of Israel responded that cryptocurrencies cannot be a tool for circumventing possible economic sanctions^5,9. The statement amounted to a rare rebuke of the prime minister by the central bank¹².

Opposition leaders also panned the proposal to use crypto to evade sanctions⁸. A group of top economists went further, describing it as ‘a solution used by criminal gangs’⁶.

The economists pointed to countries that have lived under similar sanctions, naming South Africa, Iran and Russia, and warned about what would happen to the living standards of Israelis^1,7. They said Israelis would experience a sharp decline in living standards under such conditions¹³.

Why it matters to investors

The episode puts the head of government and the central bank publicly at odds over how Israel would respond to economic pressure from abroad^9,12. For holders of Israeli assets, the dispute is less about cryptocurrency itself than about what it reveals: that the possibility of international sanctions is being discussed openly at the top of the government⁴.

Critics framed the risk in terms of ‘diplomatic and financial isolation’¹⁰. The comparison the economists chose, with South Africa, Iran and Russia, places Israel alongside economies that were cut off from much of the global financial system¹.

A former US sanctions official, Miad Maleki, who spent years working to choke Iran’s economy through secondary sanctions, has also taken the plan apart¹¹. He argued that the same sanctions toolkit, and blockchain in particular, would not offer the escape route the proposal assumes¹¹.

The central bank’s position is that digital assets offer no protection from such measures⁵. That leaves the policy question of how Israel would respond to sanctions unresolved, with the prime minister and the monetary authority taking opposite views in public¹².

What to watch

The proposal has become part of the political contest, with opposition leaders using it against the prime minister⁸. Opinion polls point to a potential stalemate³.

Investors will watch whether the government develops the idea into a concrete plan or drops it after the central bank’s response^4,5. Any further statements from the Bank of Israel on sanctions risk would also be closely read, given how unusual its public rebuke was¹².

The wider question raised by the critics, whether Israel faces a period of diplomatic and financial isolation, is likely to outlast the dispute over cryptocurrency^6,10.