Bank of Israel rebukes Netanyahu plan to use crypto to dodge sanctions

The central bank stated that cryptocurrencies "cannot serve as a means to circumvent sanctions imposed on Israel." Furthermore, it advised that "The right course of action for the Israeli economy is to preserve economic relations with our primary trading partners and to focus on preventing sanctions and their negative impact on the economy."

Netanyahu had previously indicated in a Channel 10 interview on Friday that preparation for potential banking sanctions was necessary, mentioning that he had requested a plan involving crypto and blockchain networks as an alternative.

However, on Sunday, over 100 economists, including former Bank of Israel governor Jacob Frenkel and several Nobel laureates, signed a letter cautioning that this strategy would lead to greater unemployment and a decline in foreign investment. They described the approach as "a puzzling solution, one accepted in criminal organizations, that will not help in the slightest."

Political opponents immediately reacted to the proposal. Gadi Eisenkot, a challenger in Tuesday's election, labeled the concept "madness" and referred to it as the "BibiCoin policy," while opposition leader Yair Lapid drew comparisons between Netanyahu's "bypass economy" and those of Iran, Russia, and Venezuela.

Experts also questioned the feasibility of the plan. Gali Ingber, who heads finance studies at the College of Management Academic Studies, noted to The Times of Israel that "It's not possible to circumvent sanctions with digital currencies as the blockchain system is publicly open and transparent, which means that every transfer is registered and can be traced to its origin."

This development occurs as various nations, such as the UK, France, and Canada, have announced or pledged trade restrictions regarding Israeli settlements in the West Bank, amid concerns over settlement expansion and increasing settler violence.

The collective warnings from economic institutions suggest a significant divergence between political maneuvering and established financial regulatory realities.

Why it matters

This public rebuke highlights the regulatory stance of Israel's central bank against attempts to circumvent international financial restrictions. The debate over using digital assets for sanctions evasion is critical as the nation approaches a major election. Readers should watch how this conflict between political strategy and financial regulation plays out.