Bank of Israel rejects Netanyahu's proposal to prepare crypto routes around possible sanctions

Israeli Prime Minister Benjamin Netanyahu said in an interview that the international community could impose banking sanctions on Israel, and that the country should prepare its economy to get around such sanctions using crypto, the Times of Israel reported. The Bank of Israel publicly rejected the idea. It said cryptocurrencies "cannot be used as a route for bypassing sanctions" and that the right course for the economy is to preserve relationships with its main trade partners and to focus on preventing sanctions.

Netanyahu did not withdraw the proposal. "I thank the Bank of Israel for the advice, I listen, but I do what I think [is best]," he said, according to Cointelegraph's summary of the exchange. Gadi Eisenkot, who leads an opposition party, accused him of "dismantling the Israeli economy."

The exchange matters for two reasons. First, a sitting prime minister has openly raised the prospect of banking sanctions against Israel, a risk that Israeli officials have usually not discussed in public. Second, Israel's own record undercuts the plan's mechanics. In July, Defense Minister Israel Katz announced sanctions on 37 crypto wallets that Israel says belong to Iran's Islamic Revolutionary Guard Corps, and Israeli agencies have repeatedly seized wallets they link to Hamas and Iran. The state that Netanyahu proposes to shield has shown how traceable public ledgers are.

Sanctions evasion at the scale of a national economy needs dollar liquidity and off-ramps. The largest dollar stablecoins, Tether's USDT and Circle's USDC, can be frozen at the address level by their issuers. A country whose main trade partners are western would gain little from switching to rails that those same partners can monitor and block.