The Bank of Israel has publicly rejected Prime Minister Benjamin Netanyahu’s proposal that cryptocurrencies and blockchain networks could be used to bypass potential international financial sanctions, warning that digital assets cannot replace established banking and trade relationships.
In a statement issued on Saturday, October 24, 2026, the central bank said cryptocurrencies “cannot serve as a means to circumvent sanctions imposed on Israel.” It urged the government to prioritize preserving economic relations with primary trading partners and focusing on preventing sanctions rather than building alternative payment mechanisms.
The dispute followed Netanyahu’s October 23 interview with Channel 10, in which he said Israel needed to prepare for possible banking sanctions and confirmed that blockchain was “one of the alternatives, certainly.” He did not specify which currency, network or government body would implement the plan. Netanyahu later acknowledged the central bank’s objections but said he would continue to act according to his government’s assessment.
The discussion came after Britain, France and Canada announced or pledged restrictions on trade with Israeli settlements in the occupied West Bank. More than 100 economists, including former Bank of Israel governor Jacob Frenkel and several Nobel laureates, signed a letter on Sunday warning that a crypto-based sanctions-avoidance strategy would raise unemployment, reduce foreign investment and damage economic activity. They described it as “a puzzling solution, one accepted in criminal organizations, that will not help in the slightest.”
Opposition leaders also seized on the comments ahead of Tuesday’s parliamentary election. Gadi Eisenkot, Netanyahu’s main challenger, called the idea “madness” and dismissed it as a “BibiCoin policy,” while opposition leader Yair Lapid compared the proposed “bypass economy” to those of Iran, Russia and Venezuela.
The central bank and economists emphasized that public blockchain transactions are traceable, regulated exchanges and stablecoin issuers often enforce sanctions restrictions, and international trade still relies on counterparties, legal compliance, financing and access to goods and services. Israel itself has used blockchain tracing against sanctioned groups; in July, Defense Minister Israel Katz signed orders on 37 crypto wallets holding more than 24 million shekels that Israel said belonged to Iran’s Revolutionary Guards.
For the cryptocurrency industry, the episode illustrates the gap between blockchain’s technical ability to move assets across borders and the practical, legal and commercial limits of using digital assets as a substitute for regulated international finance.
