Senior figures in Israel's economic establishment and academic experts have sharply criticized Prime Minister Benjamin Netanyahu's suggestion that Israel should use the cryptocurrency market to supposedly find a clever way around sanctions that could soon be imposed on the country's banking system.
Netanyahu also claimed that he had already ordered an action plan involving digital currencies to be prepared. However, no government official in the economic ministries has heard of such a plan, and even senior officials in the Prime Minister's Office are unaware of any team supposedly working on it.
Meanwhile, former senior government officials expressed astonishment and even anger at the very suggestion. "The prime minister's remarks make it sound as though blockchain is the solution that will allow Israel to prepare for sanctions. It is important to be clear: Blockchain is not a way to circumvent sanctions. Moving a transaction onto a blockchain network or using a digital token does not allow sanctions to be bypassed, does not create an alternative economy, does not nullify legal prohibitions and does not change the obligations of the parties involved in a transaction," said Yair Avidan, former supervisor of banks at the Bank of Israel.
"A blockchain network does not operate unilaterally. For it to facilitate payments, it requires the cooperation and consent of banks, payment service providers and trading partners, as well as liquidity and connections to other systems. When sanctions are imposed, it cannot be assumed that these parties will agree to participate in transactions intended to circumvent them. They are subject to the law and their own compliance risks. Without their participation, the network does not provide a practical alternative," Avidan added.
"Of course, the risk posed by sanctions is real. They could damage banking relationships, trade, credit and investment, and the consequences could also drive up the cost of living. Blockchain may be useful in a different area: preparing for financial resilience and operational continuity if payment infrastructure is damaged or disrupted during a crisis. It can be one component of a payment continuity plan, but it is not a cure for sanctions. Preparing for sanctions requires responsible policymaking, maintaining trade relationships and trust, and economic preparedness," Avidan concluded.
Yair Avidan
(Photo: Bank of Israel Spokesperson's Office)
Yarom Ariav, former director general of the Finance Ministry, said: "The prime minister's latest remarks about using cryptocurrencies as a means of dealing with economic sanctions are a resounding warning sign. Sanctions are not an inevitable force of nature. They are the direct result of failed policies. The very suggestion of finding financial 'workarounds' puts us in the same category as isolated regimes such as Iran and recalls South Africa under apartheid, when sanctions brought the country to its knees.
"This reckless statement raises serious questions about the stability of the financial system, could shake the capital market, lead to a credit rating downgrade and bring us closer to a deep crisis. The consequences would be devastating: an accelerated exodus of foreign investors deterred by a country isolated from the global banking system, and an unprecedented acceleration of the brain drain, as highly skilled professionals seek their futures in more stable places. All of this would severely damage the economy's reputation, destroy economic growth and directly harm the income of every household.
"As the former Finance Ministry director general during the 2008 crisis, I can say that the prime minister's unfortunate statement raises serious questions about his fitness to make responsible decisions and directly endangers our economic future."
Yarom Ariav
(Photo: Alex Kolomoisky)
Professor Yair Zimon of Tel Aviv University added: "Prime Minister Benjamin Netanyahu's proposal to prepare an 'economy that circumvents sanctions,' based on cryptocurrencies and blockchain technology, is an extreme, dangerous and irresponsible move that would lead to Israel's disconnection from the global financial system and international banking, followed by the destruction of its trade and high-tech infrastructure. This proposal demonstrates a dangerous lack of understanding of how the modern global economy works.
"Israel has a modern, open economy that depends entirely on foreign trade, foreign investment, technological cooperation and access to the world's major payment and settlement systems, such as SWIFT. High-tech companies, venture capital funds and international investors cannot and will not operate in a financial environment based on anonymous, unregulated cryptocurrencies, which are subject to extreme volatility, cyber risks and the absence of a regulatory safety net. A transition to cryptocurrency would force not only the government but also citizens and businesses to disconnect from the world's major banks.
"The direct consequences of such a move would be an exodus of high-tech companies, massive capital flight, a collapse in the shekel's exchange rate, runaway inflation and severe damage to Israel's ability to import essential goods, energy and medicines. Digital currencies cannot replace major international trade agreements, nor can they compel any country or foreign company to purchase products or services from Israel. Turning Israel's stable financial system into one based on volatile, unregulated currencies would be tantamount to gambling with the fate of the entire economy.
"I hope Netanyahu comes to his senses, corrects his remarks as quickly as possible and distances himself from any policy of circumventing sanctions, before the governor of the Bank of Israel, who is currently holding urgent talks with central banks around the world, tears his hair out, the Tel Aviv Stock Exchange plunges and the dollar surges sharply," Zimon said.