Skip to content
Blockchain Posts

regulation

Bank of Israel rejects Netanyahu's crypto plan to circumvent possible sanctions

Days before Israel's Oct 27 election, the Bank of Israel said crypto 'cannot serve as a means of circumventing sanctions,' and 109 economists signed a letter against the Channel 10 proposal.

by 5 min read
regulationisraelsanctionsstablecoin

The Bank of Israel publicly rejected Prime Minister Benjamin Netanyahu's suggestion that Israel use cryptocurrency and blockchain technology to work around possible banking sanctions, in a statement issued Saturday, October 24, 2026. The rejection lands three days before the country's October 27 election and two days after Netanyahu's October 23 Channel 10 interview in which he confirmed asking officials to prepare a crypto-based plan. Decrypt, Al Jazeera and Jewish Insider carried the central bank's text and the follow-up letter from 109 economists and former officials.

What the central bank said

The Bank of Israel's institutional statement, published on Saturday, is terse:

  • "Cryptocurrencies cannot serve as a means of circumventing sanctions imposed on Israel."
  • The right course is to "preserve economic relations with our primary trading partners" and to focus on preventing sanctions rather than engineering around them.

The statement is attributed to the central bank as an institution. Decrypt notes it does not name an individual approver. The current governor's personal position is not quoted.

What Netanyahu said in the Channel 10 interview

In the Channel 10 interview with broadcaster Roy Katz, Netanyahu said:

  • "One must understand that banking sanctions could be imposed."
  • When pressed on crypto specifically: "Very true, very true. Blockchain is one of the alternatives, certainly."

He did not identify who is drafting the plan, which jurisdictions or stablecoins are under consideration, or any implementation timeline. In follow-up remarks after the central bank statement, Netanyahu said he was considering the criticism, that crypto was only one possible option, and that officials had not decided whether to use it.

The economist letter

A separate letter dated October 25 was signed by 109 Israeli economists, business executives and former public officials opposing the plan. Jewish Insider carried the letter's framing: Israel's banking integration with the EU, UK and US clearing systems is the economic surface the signatories are not willing to put at risk for a hypothetical crypto rail that, in practice, routes through those same banking surfaces to touch fiat.

The sanctions context Netanyahu was reacting to

The remarks did not land in a vacuum. In the week preceding the interview:

  • United Kingdom, France and Canada announced new restrictions targeting imports from Israeli settlements in the occupied West Bank.
  • The European Union signalled possible further measures.
  • No G7 state has sanctioned Israel's banking system itself as of this writing; the measures announced are trade-restrictive and sector-specific, not SDN-list designations against Israeli financial institutions. Al Jazeera's piece explicitly notes this.

Netanyahu's framing — that banking sanctions "could be imposed" — is a projection, not a current state. The Bank of Israel's framing — that the response is to preserve banking relationships, not to prepare an evasion rail — is the mirror position.

Why "evade sanctions with crypto" rarely survives contact with the primary dealer network

Netanyahu's suggestion collides with the operational reality of modern crypto. The on-ramp and off-ramp still touch regulated banks:

  • Fiat-to-stablecoin and stablecoin-to-fiat flows settle through banks that service USDC (Circle), USDT (Tether) and euro / sterling stablecoin issuers. All three major issuers comply with OFAC and EU sanctions regimes, with public addresses for their enforcement.
  • Tether has already frozen tens of millions of dollars in USDT this year on OFAC referrals, including IRGC-linked wallets Israel designated.
  • Stablecoin reserves sit in US Treasury bills custodied at US-regulated banks and primary dealers, giving US authorities a direct lever on redemption flows.

A state-scale "evade sanctions via crypto" rail would have to either (a) run on a stablecoin issuer willing to defy OFAC, (b) route exclusively through peer-to-peer BTC / monero flows, which no sovereign has sustained at national-trade scale, or (c) operate inside a closed CBDC bridge with a willing counterparty. Each path trades more operational cost than it saves on the sanctions bypass side.

What to watch

  1. The October 27 election result. The post-election coalition composition will determine whether this is an operational plan or a campaign posture. The Bank of Israel's note is institutional, not political; any new government inherits the position.
  2. Any public spec of what Netanyahu's team was actually studying. The interview did not name a stablecoin, a blockchain or a counterparty state. Any released spec would substantially change the technical conversation.
  3. Tether, Circle and EURC positions. No stablecoin issuer has publicly commented on being a potential rail for Israeli sanctions evasion. A statement from any of them would be material.
  4. The economists' letter's reach. Follow-on signatures and any formal Knesset motion citing the Bank of Israel statement are the political mechanics worth tracking inside Israel.
  5. IMF and BIS posture. Both institutions have been active on crypto-and-sanctions policy. A public note from either, pegged to this story, would be substantive.

Context

This is the first time a G7-aligned central bank has publicly rejected an announced political-leader-level plan to use crypto for sanctions circumvention, and the dividing line it draws is clean: central banks will defend their own correspondent-banking relationships before they will underwrite a crypto workaround. The nearest comparable instance is Russia's post-2022 experiments with crypto in sanctioned trade with Iran and India — those remained small, operationally painful, and settled mostly through counterparty banks willing to take sanctions risk. The Bank of Israel's Saturday statement reads as a pre-emption of the same cost structure, with the extra variable that Israel's current trading-partner surface is overwhelmingly G7, EU and UK.

Sources:

Related stories