Israeli Prime Minister Benjamin Netanyahu said Israel should prepare a blockchain-based plan to respond if international sanctions restrict its banking system, drawing a direct public rebuke from the Bank of Israel. In a Friday interview, Netanyahu described cryptocurrency and blockchain as possible tools for an alternative economy if sanctions were imposed, confirming that he had asked advisers to develop a proposal. He provided no design details or implementation timetable.

The remarks came two days before Israel's October 27 election, amid warnings that foreign measures could affect the country's wider economy. The Bank of Israel formally rejected cryptocurrency as a route around international sanctions, urging political leaders instead to preserve trade ties and prevent further restrictions. The formal statement put the central bank in direct conflict with the prime minister's proposal.

Institutional Pushback in Election Season

Netanyahu made the comments in a Channel 10 interview on Friday. He said Israel should prepare for possible sanctions on banks and other economic restrictions. Asked whether he meant cryptocurrency, he agreed, then described blockchain as another option. He said advisers were already preparing a plan.

The proposal remains undefined. Netanyahu did not identify the currencies, networks, government agencies, or legal changes under consideration. The Block reported that he gave no timetable or implementation details. As described, the initiative amounts to contingency planning rather than an operating national payment system.

The discussion followed measures announced by Britain and 11 other Western countries targeting settlement goods. The measures focus on the settlements, though economists warned the economic effects could reach Israel proper. Netanyahu cited the possibility of banking restrictions and argued that alternative payment channels could help the country respond to such measures.

The election sharpened political tensions ahead of the vote for a new Knesset. Opposition leaders have argued that the government's policies contributed to Israel's international isolation, and the blockchain sanctions plan became another point of disagreement during the campaign. The dispute added a digital-asset dimension to a contest already centered on Israel's international standing.

Bank of Israel Says Crypto Cannot Bypass Sanctions

The Bank of Israel said cryptocurrencies cannot serve as a route for bypassing sanctions. It urged political leaders to maintain economic ties with major trading partners and to focus on preventing restrictions. The central bank's statement rejected the idea that digital assets could protect the national economy from financial pressure.

The plan also drew criticism from opposition figure Gadi Eisenkot. On X, Eisenkot called it the “BibiCoin vision” and said it threatened national security. He warned it could worsen isolation and deter investment, asking how Israeli technology firms would receive overseas payments if foreign banks shunned crypto. At Saturday's anti-government rally in Tel Aviv, attendees also criticized the proposal, extending the backlash beyond political leaders.

On Sunday, more than 100 economists and former Bank of Israel officials signed a letter opposing the plan, Reuters reported. They warned sanctions could reduce foreign investment, increase unemployment, and weaken Israel's economic standing. The warning focused on the consequences of financial isolation, beyond payment rails.

Practical Limits Beyond Digital Transfers

Digital assets can move value outside some conventional banking channels, but that does not make sanctions disappear. Blockchain transactions be traced, and authorities or service providers may identify or block wallets linked to sanctioned entities. A blockchain sanctions plan may move value, but it cannot hide every transaction record.

The plan also faces practical barriers a transfer alone cannot solve. Crypto cannot replace access to trade finance, bank credit, global capital markets, or foreign companies willing to transact. A business may still need compliant banks, insurers, suppliers, and customers for cross-border deals.

Columnist Nadav Eyal said crypto cannot replace bank credit, capital markets, or firms willing to trade internationally. Ben Samocha, founder of CryptoJungle, likewise said digital assets were not a suitable sanctions workaround, pointing to blockchain investigations that can trace funds and restrict their fiat access. The pattern they describe has precedent beyond Israel: US authorities have sanctioned cryptocurrency mixers and services for laundering funds tied to sanctioned states, while sanctioned jurisdictions such as Russia and Iran have explored digital assets as partial channels for cross-border trade.

Netanyahu said Saturday he would consider the Bank of Israel's criticism but would do what he thought best. He has not named the advisers, blockchain, currencies, or implementation schedule for the plan. As of Saturday, the proposal existed only as a direction to advisers, with no published blueprint.