Netanyahu faces backlash over plan to use cryptocurrency to bypass sanctions

Israeli Prime Minister Benjamin Netanyahu is facing mounting criticism from economists financial authorities and political opponents after suggesting that Israel could turn to cryptocurrency and blockchain technology to protect its economy from potential international sanctions.

JERUSALEM: Israeli Prime Minister Benjamin Netanyahu is facing mounting criticism from economists financial authorities and political opponents after suggesting that Israel could turn to cryptocurrency and blockchain technology to protect its economy from potential international sanctions.

In an interview with Israel’s Channel 10 on Friday, Netanyahu said his government was preparing for the possibility of wider sanctions including restrictions targeting the country’s banking system. He suggested that alternative currencies and blockchain-based solutions could help establish an economic system capable of operating despite such restrictions.

The remarks come amid growing diplomatic tensions over Israel’s settlement policies in the occupied West Bank. In September, Britain, France and Canada announced plans to restrict imports from Israeli settlements adding to pressure on Israel from some of its traditional international partners.

Netanyahu’s proposal drew an unusual response from the Bank of Israel, which rejected the idea that cryptocurrencies could provide a reliable way to circumvent sanctions. The central bank urged the government to preserve economic relationships with major trading partners and focus on preventing restrictions that could damage the national economy.

The criticism intensified on Sunday when more than 100 economists signed a letter opposing the proposal. The signatories included former central bank officials former Bank of Israel governor Jacob Frenkel and several Nobel laureates.

They warned that pursuing such a strategy could increase unemployment, reduce foreign investment and weaken Israel’s position in the global economy. Citing the experiences of countries including South Africa, Iran and Russia, they argued that international economic isolation could significantly lower living standards and limit the government’s ability to finance security and defence.

The economists also questioned whether cryptocurrency could offer a practical solution to the challenges posed by sanctions warning that the proposal could further undermine international confidence in Israel’s economy.

Political rivals have also criticised Netanyahu’s comments ahead of Tuesday’s election. His main challenger, Gadi Eisenkot described the proposal as reckless arguing that it could encourage businesses to relocate overseas and threaten national security.

Opposition leader Yair Lapid also attacked Netanyahu’s economic record and warned voters about the potential consequences of further isolation.

The controversy has emerged as opinion polls suggest the election could produce a parliamentary deadlock, with neither the governing coalition nor the opposition alliance securing a clear majority.

The debate highlights the economic risks facing Israel as diplomatic tensions grow and raises questions about whether digital currencies could meaningfully protect a country from international financial restrictions.