Israeli Prime Minister Benjamin Netanyahu revealed in an October 23 interview with Channel 10's Roi Katz that he has asked for a plan to organize a 'bypass economy' using blockchain and digital currencies, citing the risk of banking sanctions against Israel. Asked whether blockchain was the alternative, he answered 'one of them, certainly,' though no token, network, operator or timeline was named.
Netanyahu separately said Israel should not expect U.S. defense aid at previous levels and defended an additional NIS 400 billion in defense spending, while disagreeing with Bank of Israel Governor Amir Yaron. The Bank of Israel already runs a digital-shekel project, but the report did not link it to Netanyahu's request.
Britain announced on October 19 that it created new powers to sanction individuals and companies involved in building settlements and plans action on services that finance them, though that measure targets settlement activity rather than Israel's banking system. The U.S. Treasury's Office of Foreign Assets Control says sanctions obligations are the same for digital and traditional money. Dollar stablecoin issuers can block addresses, exchanges must screen identities, and sanctions authorities can designate issuers and operators. Circle's USDC terms allow blocking on government orders, and Russia's Garantex case showed Tether freezing about $28 million in USDT after the exchange was shut down in March 2025; OFAC later sanctioned the A7A5 stablecoin issuer and Grinex in August 2025.
Next steps include defining the regulatory and operational framework and clarifying which Israeli body will own the plan.
