'Diplomatic and financial isolation': Netanyahu’s crypto plan to bypass sanctions draws rebuke

Israeli Prime Minister Benjamin Netanyahu has proposed exploring the use of cryptocurrency to circumvent potential international banking sanctions, as nations around the world continue to debate sanctions against Tel Aviv. Netanyahu proposed the move in an interview with Channel 10’s economic broadcaster, aired on Friday, days before Israel’s 27 October parliamentary election. “We need to prepare ways to evade banking sanctions through an alternative economic system,” Netanyahu said. “You know what that means - the currencies that can bypass them. I’m working on that, too.” Asked whether he meant cryptocurrency, Netanyahu replied: “Very correct.” Israel’s central bank has rebuked the proposal, warning that digital currencies cannot replace economic relations with the country’s main trading partners. New MEE newsletter: Jerusalem Dispatch Sign up to get the latest insights and analysis on Israel-Palestine, alongside Turkey Unpacked and other MEE newsletters “Cryptocurrencies cannot serve as a means of circumventing sanctions on Israel,” the Bank of Israel said in a statement on Saturday. “The right course for Israel’s economy is to preserve economic relations with our main trading partners and focus on preventing sanctions and their negative impact on the economy.” The bank said Israel’s political leadership was responsible for preventing sanctions and urged the government to take action to protect the country’s economic ties. UK recognises 'ethnic cleansing' in West Bank, sanctions settlements and declares Israeli occupation illegal Read More » In a subsequent interview on Saturday, Netanyahu said cryptocurrency was one of several possible options and that he would take the central bank’s objections into account. “I hear the objections and I take them into account,” he said. “I thank the Bank of Israel for their advice. I listen, but I do what I think is right.” The idea has been criticised by opposition politicians, former bankers and economists, who say trying to avoid international financial sanctions could hurt investor confidence. Over 100 Israeli economists, business leaders and former senior officials, including two Nobel Prize winners, have signed a letter saying that if Israel faces broad international banking sanctions there will be "tremendous and irreversible damages" to the economy. The letter went on to say that Israel's banking sector, exporters, investors and high-tech industry would suffer greatly if the country faced financial isolation. Diplomatic and financial isolation The development comes as Israel faces growing criticism over settlement expansion and settler violence in the occupied West Bank. In September, sanctions imposed by the UK and 11 other countries focused on the trade of goods from Israeli settlements in the occupied West Bank. France and Canada join UK in announcing sanctions on Israeli settlements Read More » The UK said it will introduce sanctions banning imports from Israeli settlements, which will be accompanied by targeted sanctions against individuals and companies that support, enable or benefit from settlements. Nations including France, Canada and Spain have also said they will introduce, or are considering introducing, sanctions against settlement goods. Opposition leader Yair Lapid said that Netanyahu is preparing for economic isolation rather than working to prevent it. Netanyahu’s proposal for evading potential sanctions “belongs to countries like Iran, Russia, and Venezuela - nations whose banks are cut off from the world, whose companies cannot accept payments, and whose young people are fleeing,” Lapid said on X. Avigdor Liberman, a former finance minister and leader of the opposition Yisrael Beiteinu party, said Netanyahu was acknowledging the risk of economic isolation without explaining how he would prevent it. Netanyahu “is finally admitting that Israel faces a real danger of diplomatic isolation and economic sanctions, yet instead of explaining how he intends to prevent them, he is already talking about preparing a ‘sanctions-bypassing economy’,” Liberman said. Changing political climate Netanyahu also warned that Israel should prepare for an eventual end to US military assistance, saying Washington’s political climate had changed. “If you think we will continue receiving what I secured twice - tens of billions of dollars in American aid for the defence budget - you’d better prepare yourselves and get used to the idea that this will not continue,” he said. US officials threaten retaliation against UK over Israeli settlements sanctions Read More » “That is because America has changed, not because Israel has changed. It will end. It is only a matter of time.” Currently, there is a Memorandum of Understanding between the US and Israel. As per the agreement, Washington provides Israel with $3.3bn annually in foreign military financing and $500m for joint missile defence programmes. This totals $3.8bn per year; however, it is contingent on congressional funding. The US has approved billions of dollars in additional military assistance to Israel following the Hamas-led attacks of 7 October 2023 and the subsequent genocide in Gaza. In April 2024, President Joe Biden signed a supplemental funding bill that included additional support for Israel’s military and missile defence systems.