Israel’s central bank and opposition politicians have criticised Prime Minister Benjamin Netanyahu after he proposed exploring cryptocurrency and blockchain technology as possible ways to circumvent international financial sanctions.
The controversy followed Netanyahu’s comments in an interview broadcast on Friday, October 23, 2026, in which he warned that Israel could face banking sanctions and said he had asked for a plan to prepare the country for such a possibility.
The proposal drew a direct response from the Bank of Israel, which said cryptocurrencies could not be used as a route for bypassing sanctions. The bank urged the government to focus instead on preserving economic relationships with Israel’s principal trading partners and preventing restrictions that could harm the economy.
According to reports by The Times of Israel, Netanyahu acknowledged the criticism on Saturday, saying he would take the central bank’s advice into account while maintaining that he would make his own decisions.
Bank of Israel Rejects Netanyahu’s Proposal
In its response, the Bank of Israel argued that cryptocurrency was not a substitute for maintaining access to international financial networks.
The central bank said the government should concentrate on preventing sanctions and limiting their potential economic consequences rather than preparing to bypass them.
The warning highlights concerns about the practical limits of digital currencies. Although cryptocurrency can provide alternative channels for transferring funds, transactions on many blockchain networks leave records that can be traced. Exchanges, banks and other financial service providers may also be subject to sanctions and compliance requirements.
As a result, moving payments onto a blockchain does not automatically remove legal restrictions or guarantee that international businesses will continue trading with a country facing sanctions.
Why Netanyahu Is Considering Cryptocurrency
Netanyahu’s remarks came amid growing international criticism of Israeli government policies, particularly settlement expansion and violence by Israeli settlers against Palestinians in the occupied West Bank.
Britain and other Western countries have announced or imposed measures targeting Israeli settlements. Although some of these measures are focused specifically on settlement-related activity, economic analysts have warned that broader restrictions could affect commercial relationships and investment.
During his interview, Netanyahu said Israel needed to prepare for the possibility of banking sanctions and develop ways to keep its economy functioning if access to conventional financial channels became more difficult.
When blockchain technology and cryptocurrency were raised as possible alternatives, he confirmed that he had asked for a plan to be prepared.
However, Netanyahu did not publicly provide details about which digital currencies might be considered, who would develop the plan or how such a system would operate.
The proposal therefore remains a contingency idea rather than a fully explained policy framework.
Opposition Leaders Raise Economic Concerns
Netanyahu’s comments also attracted criticism from opposition politicians, who argued that discussing a sanctions workaround could undermine confidence in Israel’s economic future.
Gadi Eisenkot, an opposition leader, warned that the proposal risked damaging the country’s economic standing. He questioned how Israeli technology companies could maintain international investment, business partnerships and payments if relations with established financial institutions deteriorated.
Naftali Bennett also criticised the prospect of Israel becoming increasingly disconnected from the global economy.
Avigdor Liberman, another opposition figure, argued that cryptocurrency was not an invisible financial system capable of placing transactions beyond the reach of regulators. He said blockchain transactions could be traced and that authorities could identify or block digital wallets associated with sanctioned entities.
These objections reflect concerns that an attempt to replace established financial relationships with alternative payment systems could discourage investment and create additional uncertainty for businesses.
The criticism, however, represents the views of Netanyahu’s political opponents and should be distinguished from the central bank’s specific warning about the limitations of cryptocurrency.
Can Cryptocurrency Bypass International Sanctions?
Cryptocurrency can facilitate cross-border transfers without relying on every traditional banking intermediary. That feature has attracted attention from individuals and organisations seeking alternatives to conventional payment networks.
But the technology does not provide blanket protection from sanctions. Transactions can leave permanent records on public blockchains, while cryptocurrency exchanges and other service providers may restrict accounts or transactions linked to sanctioned parties.
The effectiveness of any proposed system would also depend on whether foreign suppliers, investors and financial institutions were willing and legally able to accept payments.
For Israel, the central bank’s position is that maintaining strong economic relationships with major trading partners is more important than attempting to construct a system designed to work around potential restrictions.
Netanyahu Says He Will Consider the Criticism
Responding to the backlash, Netanyahu said he had heard the Bank of Israel’s objections and would take them into account. He also indicated that the advice would not prevent him from making his own decisions.
His response leaves open the question of whether the proposed cryptocurrency contingency plan will proceed and, if so, what form it might take.
The debate comes as Israel faces scrutiny over its international relationships and the possible economic consequences of additional sanctions. It also raises broader questions about the role of digital currencies in national financial planning.
For now, the Bank of Israel has made its position clear: Israel should work to prevent damaging sanctions and protect its international economic ties rather than assume cryptocurrency can provide a dependable escape route.