Netanyahu asks for blockchain plan to counter possible banking sanctions

What happened

Israeli Prime Minister Benjamin Netanyahu said he has asked for a plan to use cryptocurrency and blockchain networks to help the country withstand possible banking sanctions, telling Channel 10 that Israel needs an alternative economy and currencies able to route around restrictions. The interview aired on Friday, four days before Israelis vote in the national election on October 27.

Asked directly whether blockchain could provide a way around sanctions, Netanyahu replied that it was one of the options and that he had already requested that a plan be drawn up. He gave no indication of which currencies or networks might be involved, which agencies would draft the proposal, or when it could be ready.

In the same appearance he said Israel should not count on receiving tens of billions of dollars in US military assistance indefinitely, calling an eventual end a question of time and saying the country must prepare for a rainy day. He also said he wants independence in weapons production and mentioned India, whose prime minister Narendra Modi he described as a friend, as a partner already discussing cooperation on production.

Why it matters

Banking sanctions work by persuading foreign banks to stop processing payments for a country's lenders, which makes it harder for importers to pay suppliers and eventually feeds through to prices on shop shelves. For Israel the concern is not abstract: the UK banned imports from Israeli settlements in early September and announced sanctions on people and companies involved in building them, and eleven other countries including France and Canada have said they intend to restrict trade in settlement goods. More than 60 Israeli economists and former officials warned this week, according to Ynet, that measures now aimed at settlements could spread to the wider economy and raise the cost of living.

Crypto offers only partial cover. Blockchains are public and traceable, stablecoin issuer Tether can freeze wallets holding its dollar-pegged token, and exchanges and other intermediaries apply their own controls. Israel itself has been an active enforcer in the sector: on July 1 Defense Minister Israel Katz signed orders against 37 wallets holding more than 24 million shekels that the government says belonged to Iran's Revolutionary Guards and were meant to fund Hezbollah.

What the data shows

A database maintained by the Jewish People Policy Institute counts 15 recorded measures against Israel by the United States, 10 by Spain, eight by the UK, seven by Turkey and five by Belgium; the tally includes proposed legislation and institutional boycotts as well as financial steps. CoinPedia, citing the same institute, reported that 64 countries have taken or considered economic, financial or diplomatic measures against Israel.

On enforcement, Tether froze $344 million in April in cooperation with US authorities and a further $131 million in July in wallets tied to Iran's central bank and armed forces after US sanctions. The current US military aid agreement runs until September 2028, shortly before the next US presidential election.

Background

Governments under financial pressure have tried similar approaches before. Venezuela used Tether and Bitcoin to keep its oil industry running and created the Petro in an effort to move its economy outside the SWIFT system. Russia has used A7A5, a ruble-pegged token issued by a payments firm co-owned by a sanctioned state bank, which moved about $102 billion in its first year according to Elliptic before sanctions and a hack of its main exchange cut daily volume by 96% from its peak. Iran and North Korea have also used crypto to move funds.

Israel has been edging toward digital assets independently of the sanctions question. Bank Leumi, the country's largest bank, plans to offer Bitcoin trading in early 2027 through Galaxy Digital, subject to Bank of Israel approval, and in 2025 the central bank unveiled a preliminary design for a digital shekel, a central bank digital currency, without announcing further steps.

What is still unclear

No draft has been published and the scope of what Netanyahu requested is unknown. It is not clear whether the work is a technical study, a legal framework or an operational plan, nor how it would interact with Israel's own sanctions enforcement against crypto wallets, or with the banking supervision any such system would have to pass through.

What to watch

The October 27 election will determine whether Netanyahu is in a position to carry the idea forward. Also worth watching is whether any government body is formally tasked with the work and whether it produces public documentation, alongside the timeline for US military assistance and the spread of settlement-related trade measures among Israel's trading partners.

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