The Bank of Israel has rejected Prime Minister Benjamin Netanyahu's proposal to explore cryptocurrency as a means of working around potential international financial sanctions. In a statement issued on October 24, the central bank said digital assets cannot be used to bypass sanctions and urged Israel to protect its economic ties with major trading partners.

Netanyahu first floated the idea during a television interview on October 23, in which he cited the possibility of restrictions being imposed on Israeli banks. The exchange placed the role of digital assets in national financial strategy at the center of a political fight unfolding days before Tuesday's national election.

Central Bank: Crypto Cannot Circumvent Sanctions

According to the Bank of Israel, cryptocurrencies cannot serve as a means of circumventing sanctions imposed on the country. The institution called on political leaders to focus instead on preventing such restrictions from being imposed and on limiting any economic damage they might cause.

The debate comes as several economies already under sanctions pressure have turned to digital assets. Russia legalized the use of cryptocurrency in cross-border trade under an experimental regime in 2024, while Iran has at times licensed digital assets to pay for imports. Crypto transactions, unlike domestic bank transfers, settle on public ledgers, and major exchanges are required to screen users against international sanctions lists.

Netanyahu said he was preparing for a scenario involving broader international sanctions. He warned that restrictions targeting Israeli banks could make an alternative financial system necessary. Asked directly about cryptocurrency, he confirmed that it was among the options under consideration and also pointed to blockchain technology.

The proposal comes at a time when Britain, France and Canada have announced plans to block imports from Israeli settlements in the occupied West Bank, measures aimed at settlement policy amid growing international criticism of Israel's government.

More Than 100 Economists Sign Letter of Protest

The plan also drew sharp criticism from the economics community. On Sunday, more than 100 economists, including former Bank of Israel officials, signed a letter opposing Netanyahu's proposal. The signatories included former central bank governor Jacob Frenkel as well as several Nobel laureates.

The economists warned that sanctions could drive up unemployment, deter foreign investment and weaken Israel's standing in the international economy. Their letter cited South Africa, Iran and Russia as examples of countries affected by comparable measures, and cautioned that Israeli living standards could fall while the state's capacity to finance security might suffer.

Political Rivals Condemn the Proposal

Gadi Eisenkot, Netanyahu's main rival in Tuesday's election, described the cryptocurrency plan as “madness.” He warned that what he called his rival's “BibiCoin policy” could push companies to move abroad and undermine national security.

Opposition leader Yair Lapid also criticized Netanyahu's remarks, warning that Israelis could face shortages similar to those experienced in Russia and Iran.

Netanyahu, meanwhile, defended his record on Sunday and urged voters to support him. He also said that he and U.S. President Donald Trump had two years left to work together against Iran's rulers.

Opinion polls point to a possible electoral stalemate, with neither Netanyahu's ruling coalition nor an opposition alliance on track to secure a parliamentary majority. Attention now turns to Tuesday's vote and to whether the announced import bans are formally implemented.