Israel should try to prevent sanctions rather than circumvent them, the Bank of Israel said in a statement on Saturday night, a day after Israeli Prime Minister Benjamin Netanyahu said Israel may need to use cryptocurrency if it faces further sanctions.
Netanyahu’s remarks were met with criticism from economists, sanctions experts and his opponents in the election set for Tuesday.
“Cryptocurrency cannot be used as a route to circumvent sanctions,” the statement from Israel’s central bank reads. “The correct thing for Israel’s economy is to preserve economic relations with its main trading partners and to focus on preventing sanctions and their negative influence on the market.”
On Friday, Netanyahu told Israel’s Channel 10, which is focused on business, that Israel must prepare for the possibility of international sanctions by “organizing an economy to circumvent them,” and said that he “started preparing the plans” to use cryptocurrency instead.
Netanyahu also said that U.S. military aid “won’t keep coming because America has changed … it’s just a matter of time.”
Following the uproar over his remarks, the prime minister clarified in an interview with Channel 14 that “crypto is one of the means, it is not the only one and I am not sure we will use it.”
“I hear the opposition and take it into consideration,” he added. “I received advice from many places, including the Bank of Israel … but I do what I think to continue Israel’s great economic flourishing.”
Netanyahu addressed the Bank of Israel’s criticism, saying that for three years he has worked to block and prevent sanctions, and repeated recent statements that Brazil and other countries in Latin America want to grow their economic ties with Israel.
Economies that have used blockchain and cryptocurrency to circumvent sanctions include Russia, Iran and North Korea, but because all of their transactions are recorded on the blockchain, the U.S. has been able to block hundreds of millions of dollars in transactions.
The Israeli economy is largely reliant on exports, especially of technology, for which it is paid in dollars; much of Israel’s pension funds are invested abroad, and the Bank of Israel holds large foreign currency reserves tied to Western financial systems.
Israeli Finance Minister Bezalel Smotrich’s office declined to comment on Netanyahu’s remarks.
More than 100 senior Israeli economic figures, including last year’s Nobel Prize winner for Economics Joel Mokyr, former Bank of Israel presidents and vice presidents, former Finance Ministry directors-general and tech founders signed a letter “expressing deep anxiety and concern in light of … Netanyahu’s remarks about the possibility of international sanctions on Israeli banks and his puzzling proposal to prepare to use cryptocurrency to circumvent them. … Economic sanctions would utterly destroy the model that allows Israel to exist as a modern and advanced market.”
Doing so would harm banks, companies, exporters and investors, unemployment would rise, foreign investments would stop, and Israel’s economy would collapse, they warned. They noted that the average Israeli would no longer be able to shop on Amazon or AliExpress.
Mark Dubowitz, CEO of the Foundation for Defense of Democracies, who has warned in recent weeks that Israel may face economic sanctions, expressed skepticism about Netanyahu’s plans.
“Benjamin Netanyahu has done much for Israel over a long career … but his failure to grasp the potentially devastating threat of U.S. financial and economic warfare against Israel—and his faith in a ‘resistance economy’ as the answer—are deeply troubling,” Dubowitz wrote on X. “I say this as someone who helped design the Iran sanctions playbook over more than two decades and remains passionately committed to defending democracies like Israel, Taiwan. Ukraine and others. I know firsthand the power of these weapons. If the current coalition returns to power with the same policies, and Democrats take the White House in 2029, this financial warfare campaign against Israel is inevitable.”
Dubowitz added that American sanctions on Israel would be “devastating,” and that “Latin America and cryptocurrency are no credible substitutes for access to the American financial system and economy.”
“Israel has meaningful political and policy options to mitigate that risk. Believing you can circumvent American sanctions is not one of them,” he wrote.
Netanyahu’s political opponents viewed his remarks as proof of his unfitness.
Gadi Eisenkot, the leading opposition candidate for prime minister, said that “if Netanyahu continues, we won’t have savings, we won’t have international investments, we won’t be able to pay with credit cards on the Internet or abroad. We won’t be able to go abroad.”
“For Netanyahu, the conversation has gone from growth and flourishing to survival and not surrendering. One more term of Netanyahu and we will miss the austerity period,” he said, referring to Israel’s early years, in which there was widespread rationing.
