Bank of Israel rejects Netanyahu: crypto can't bypass sanctions

Israel's central bank has publicly rejected Prime Minister Benjamin Netanyahu's suggestion that cryptocurrency could help the country get around possible international banking sanctions. "Cryptocurrencies cannot serve as a means of circumventing sanctions," the Bank of Israel said on Saturday, in what Ynetnews described as an unusually direct response to the prime minister.

On Friday Netanyahu said he had asked for a plan involving blockchain to prepare the economy for sanctions. Within two days, the central bank and more than a hundred senior economists had pushed back.

What the central bank said

• Crypto is not an alternative route around sanctions.
• "The right course for Israel's economy is to maintain its economic relationships with our main trading partners and focus on preventing sanctions," the bank said.
• It added that this falls within the responsibility of the political leadership, which should act to achieve it.

The economists' letter

On Sunday a forum of 109 economists, business executives and former public officials published a letter warning that banking sanctions would cause "immense and irreversible damage," according to Ctech and The Times of Israel. Ynetnews reports that the signatories include two Nobel Prize laureates; they also include former Bank of Israel governor Jacob Frenkel and former finance ministry director-generals.

The letter says:

• Israeli banks, exporters, investors and the tech sector would be unable to operate, unemployment would surge and foreign investment would disappear.
• Ordinary Israelis could lose the use of credit cards and access to sites such as Amazon and AliExpress, foreign workers could leave because they could not send money home, and hospitals could struggle to buy equipment and medicines.
• Netanyahu's crypto idea is "a bizarre solution, the kind seen in criminal organisations," that would not help.

A smaller group of more than 60 economists had already warned about isolation and sanctions last week, Ctech notes.

Why crypto is a poor sanctions shield

The objections echo practical limits. The largest stablecoins are run by companies that can freeze addresses on request, as Tether did this week with funds tied to the CoinDCX loss, and public blockchains leave a permanent, traceable record of transfers. A national economy also needs banks, card networks and trade finance that crypto rails cannot replace. The government has not published any plan or said who would draw one up.