Israel's central bank has publicly rejected Prime Minister Benjamin Netanyahu's suggestion that cryptocurrency could help the country get around potential international sanctions, in a rare rebuke issued days before Tuesday's national election. The statement puts Israel's monetary authority on record against sanctions-evasion planning and marks an unusual public split between the central bank and the prime minister in the closing days of the campaign.

Cryptocurrencies "cannot serve as a means to circumvent sanctions imposed on Israel," the Bank of Israel said in a statement on Saturday, according to the Financial Times. "The right course of action for the Israeli economy is to economic relations with our primary trading partners and to focus on preventing sanctions and their negative impact on the economy," it added.

Netanyahu said in a Channel 10 interview on Friday that Israel needed to prepare for possible banking sanctions, and that he had asked for a plan to use crypto and blockchain networks to get around them. "Blockchain is one of the alternatives, certainly," he said. He did not say who was drafting the plan or which currency or network it would use. Netanyahu later said he was taking the central bank's position into account but would do what he believed was best, The Times of Israel reported.

The dispute comes as countries including the UK, France, and Canada have announced or pledged restrictions on trade with Israeli settlements in the West Bank, amid criticism of settlement expansion and rising settler violence. With some of Israel's primary trading partners already moving to restrict trade with the settlements, the question of how the country would respond to economic isolation has become a live issue in the election.

Economists and rivals push back

On Sunday, more than 100 economists, including former Bank of Israel Governor Jacob Frenkel and several Nobel laureates, signed a letter warning that the plan would bring higher unemployment and a collapse in foreign investment, Reuters reported. They called it "a puzzling solution, one accepted in criminal organizations, that will not help in the slightest."

Netanyahu's political opponents seized on the comments ahead of Tuesday's election. Gadi Eisenkot, the prime minister's main challenger, called the idea "madness" and said the "BibiCoin policy" would drive companies abroad, while opposition leader Yair Lapid compared what Netanyahu has called a "bypass economy" to those of Iran, Russia, and Venezuela.

Crypto and sanctions

Economists have also questioned whether the plan would work at all. "It's not possible to circumvent sanctions with digital currencies as the blockchain system is publicly open and transparent, which means that every transfer is registered and can be traced to its origin," Gali Ingber, head of finance studies at the College of Management Academic Studies, told The Times of Israel.

Israel's own enforcement record shows that traceability cuts both ways. In July, Defense Minister Israel Katz signed sanctions orders on 37 crypto wallets holding more than 24 million shekels that Israel said belonged to Iran's Revolutionary Guards, an operation that relied on the same public, traceable nature of blockchain records that Ingber described.

Opinion polls point to a possible stalemate in Tuesday's election, with neither Netanyahu's coalition nor the opposition alliance on course for a governing majority. That leaves open whether Netanyahu advances the plan despite the central bank's stated opposition, after saying he would weigh its position while doing what he believes is best.