Israeli Prime Minister Benjamin Netanyahu has warned that Israel must prepare for the possibility of international banking sanctions and suggested using cryptocurrencies and blockchain technology to circumvent them, raising concerns about the country’s economic future and its relationship with Western financial markets.
In an interview with Israel’s Channel 10 economic network on Friday, Netanyahu acknowledged that he was concerned about the prospect of sanctions spreading from settlement-related trade to Israel’s banking system.
“Of course I’m concerned,” Netanyahu said. “You have to understand that there could be sanctions, including banking sanctions. You need to prepare an economy that can circumvent them.”
Asked whether he was referring to digital currencies and blockchain technology, Netanyahu answered affirmatively, adding that he had already asked for a plan to be prepared.
The remarks came just days before Israel’s October 27 general election and against a backdrop of growing international criticism of Israeli settlement policy.
Western Sanctions Raise Fears of Wider Economic Fallout
Netanyahu’s warning follows the announcement by Britain and 11 other Western countries of sanctions targeting goods from Israeli settlements in the occupied West Bank. The measures were announced in response to settler violence against Palestinians and the expansion of settlements.
Although the measures specifically target settlement-related activity, economists and business figures have warned that their consequences could extend into Israel’s broader economy, particularly if restrictions begin affecting banks, financial institutions or companies with links to settlement activity.
The possibility of wider sanctions poses a potential challenge for Israel’s export-dependent economy, which relies heavily on access to international banking, foreign investment and trade with Western countries.
Netanyahu’s comments suggest that his government is considering contingency plans for a scenario in which restrictions threaten Israel’s access to conventional international financial channels.
However, he did not announce that a comprehensive alternative financial system had been established, nor did he say that Israeli banks were already subject to broad international sanctions.
Bank of Israel Rejects Cryptocurrency Proposal
The Bank of Israel pushed back against Netanyahu’s proposal on Saturday, warning that cryptocurrencies cannot serve as a reliable mechanism for circumventing international sanctions.
“Cryptocurrencies cannot be used as a route for bypassing sanctions,” the central bank said in a statement.
It added that Israel’s economic interests would be best served by preserving relations with its principal trading partners and concentrating on preventing sanctions and limiting their potential damage.
The intervention was an unusually direct public response by the central bank to a proposal made by the prime minister.
Netanyahu subsequently said he would take the criticism into account but signaled that he would retain the right to make his own decisions.
“I hear the resistance; I am taking it into account,” he said in an interview with Channel 14. “I thank the Bank of Israel for the advice. I listen, but I do what I think is best.”
The proposal has also raised questions about whether the government has developed a concrete plan. According to Ynet, officials in the economic ministries and senior figures in the Prime Minister’s Office were unaware of a team working on such an initiative.
Why Cryptocurrency May Not Shield Israel From Sanctions
Blockchain technology allows digital transactions to take place without relying exclusively on conventional banking intermediaries. In certain circumstances, cryptocurrencies can provide alternative channels for transferring funds.
But this does not automatically protect transactions from sanctions.
Many blockchain transactions are traceable, and companies, financial institutions and counterparties may remain subject to applicable legal restrictions regardless of the payment method they use. Access to international markets, foreign currencies, insurance and investment can also depend on relationships with regulated financial institutions.
Consequently, experts have warned that attempting to build an economy around sanctions avoidance could create additional legal, financial and reputational risks for Israeli businesses.
Rather than guaranteeing economic independence, a strategy centered on cryptocurrency could further complicate Israel’s efforts to preserve access to global capital markets.
Netanyahu Warns U.S. Military Aid May End
Netanyahu also delivered a stark warning about the future of American military assistance, arguing that Israel should prepare for a time when it can no longer rely on Washington’s existing level of support.
“If you think we’re going to continue receiving what I secured twice, tens of billions of dollars in American aid for the defense budget, get used to the fact that we won’t, because America has changed,” he said. “It’s over, just a matter of time.”
The remarks point to a possible long-term shift in Israel’s security and economic planning, should American assistance decline.
Netanyahu has previously advocated reducing Israel’s dependence on foreign military support and developing greater domestic capacity. The latest comments link that objective to his broader concerns about international isolation and possible financial restrictions.
However, he did not announce a specific austerity package or provide figures for expected spending cuts. A period of fiscal restraint could become a policy challenge if Israel were to face simultaneous reductions in foreign assistance and wider restrictions on international finance, but such an outcome is not yet established.
Opposition Warns of Economic Isolation
The proposal drew sharp criticism from opposition figures, who argued that preparing to circumvent sanctions would address the consequences of international isolation rather than its causes.
Yashar party leader Gadi Eisenkot attacked the idea, describing Netanyahu’s proposed approach as a threat to the Israeli economy and warning that it could further damage the country’s international standing.
Opposition criticism has focused on the risks to Israeli technology companies, exporters, investors and households if international financial relationships deteriorate.
The central question is whether Israel can preserve its economic integration with Western markets while facing growing diplomatic disagreements over settlement policy.
A High-Stakes Economic Warning Before Election Day
Netanyahu’s remarks expose a difficult strategic dilemma: preparing for the possibility of sanctions may be prudent contingency planning, but publicly discussing an alternative economy designed to circumvent them could alarm investors and international partners.
The Bank of Israel’s response underscores the distinction between preparing for economic risks and adopting a strategy that could weaken the country’s financial relationships.
With the election approaching, Netanyahu faces questions not only about security and diplomacy but also about how his government intends to protect Israel’s economic stability, foreign investment and access to international finance.
For now, the prime minister has called for a contingency plan, not announced a functioning cryptocurrency-based alternative economy. Whether such a plan will be developed, and whether it could meaningfully mitigate the effects of future sanctions, remains uncertain.
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