Netanyahu's crypto plan could cause 'irreversible damage' to Israeli economy, business leaders warn

The warning came from 109 prominent Israelis, including economists, business leaders, high-tech entrepreneurs, and former senior public officials. They expressed “deep anxiety and concern” about Prime Minister Benjamin Netanyahu’s conduct. Their central message was that international sanctions could cause irreversible economic damage.

The signatories warned that restrictions on Israel’s banking system could send unemployment soaring and make foreign investment disappear. They also said high-tech, described as the economy’s primary growth engine, could be paralyzed. Ordinary economic activity could suffer as well, including credit-card payments, online shopping, and purchases of medicines and medical equipment.

They compared the possible outcome with severe sanctions faced by South Africa, Iran, and Russia. The group predicted a dramatic decline in living standards and serious harm to Israel’s ability to finance its defense needs. The Bank of Israel and business organizations separately urged Israel to preserve economic relations and prevent sanctions.

Netanyahu reportedly requested a government plan for bypassing possible banking sanctions with cryptocurrencies and blockchain technology. The proposal emerged after he said US military aid would not last forever and that he was not concerned about sanctions. It became a major focus of the economic controversy.

Cryptocurrencies could, in principle, allow digital transfers without using a traditional bank account. Blockchain technology records transactions on a digital ledger rather than relying on one central bank. However, users still generally need ways to convert digital assets into ordinary currencies, buy goods, and connect with regulated financial institutions. Those points can be restricted or monitored.

The Bank of Israel said cryptocurrencies cannot serve as a means of circumventing sanctions on Israel. It urged the country to preserve economic relations with its main trading partners instead. Business leaders also rejected Netanyahu’s proposal, warning that financial systems associated with isolated countries could weaken investor confidence and Israel’s credit rating.

Cryptocurrencies are digital assets that can be transferred electronically, often without a central bank issuing or directly processing each payment. Blockchain is the shared digital ledger that records transactions across a network. It is the underlying technology for many cryptocurrencies, not a currency itself. This distinction matters because the article discusses both as a possible sanctions workaround.

An ordinary bank payment usually moves through regulated banks and established payment networks. Banks verify customers, process transfers, and connect buyers and sellers through those systems. A cryptocurrency transaction can be sent between digital wallets and recorded on a blockchain instead. The ledger is distributed across network participants rather than held by one bank.

That difference does not make crypto independent of the wider economy. People and businesses commonly need exchanges, banks, payment providers, and merchants to convert crypto into government-issued money or use it for purchases. Those access points can be regulated, monitored, or restricted. The Bank of Israel therefore said crypto cannot reliably circumvent sanctions on Israel.

The Bank of Israel’s position is that cryptocurrencies cannot serve as a reliable means of circumventing sanctions on Israel. Sanctions can restrict the banks, payment providers, exchanges, and trading relationships that connect a country to the international economy. A digital token does not automatically restore those connections.

For example, an Israeli company might hold cryptocurrency, but it could still need a regulated exchange or bank to convert it into dollars or another national currency. A foreign supplier may also require payment through ordinary financial channels. If those institutions refuse transactions because of sanctions, crypto ownership alone would not guarantee access to goods or services.

The central bank therefore emphasized a different priority: preserving economic relations with Israel’s main trading partners and preventing sanctions. Business leaders agreed. Galit Miran warned that adopting financial models associated with isolated countries could undermine investor confidence and Israel’s credit rating. The Manufacturers Association said free trade and free movement of capital were essential to economic resilience.

The economists warned that sanctions could affect far more than government finance or large companies. If Israeli banks lost access to international banking systems, everyday payments and imports could become difficult. Their concern was that economic isolation would quickly reach households, businesses, and public services.

They specifically mentioned the inability to use credit cards and the loss of access to online shopping platforms such as Amazon and AliExpress. They also warned that foreign workers could leave. Healthcare providers could face serious difficulty purchasing medicines and medical equipment. These examples show how banking links support routine purchases as well as essential services.

The broader risks would include soaring unemployment, the disappearance of foreign investment, and paralysis in high-tech, which the signatories called the economy’s primary growth engine. They compared the possible scenario with South Africa, Iran, and Russia. Their warning was that living standards could fall sharply while Israel’s ability to finance its defense needs was damaged.

The warning came from 109 people spanning economics, business, high-tech, and government. The group included two Nobel Prize laureates, former Bank of Israel governors and deputy governors, former banking supervisors, senior Finance Ministry officials, and prominent technology founders. Its breadth gave the statement support across several parts of Israel’s economy.

The article does not provide a percentage for foreign investment or high-tech’s share of the economy. It does describe high-tech as Israel’s primary growth engine. The signatories warned that sanctions could make foreign investment disappear and paralyze that sector. Together, those warnings indicate why they viewed international financial access as economically central.

The list included figures such as Joel Mokyr, Aaron Ciechanover, Jacob Frenkel, Alon Cohen, Marius Nacht, and Gigi Levy-Weiss. The Bank of Israel and Manufacturers Association also emphasized maintaining international economic relations. Their shared concern was that isolation could damage both immediate activity and future growth.

International banking relationships let companies and governments send and receive money across borders. They support trade payments, foreign investment, access to imported goods, and transactions with suppliers. The article connects these relationships to medicines, medical equipment, online shopping, credit cards, and defense financing. Losing them would therefore affect both public institutions and households.

A foreign supplier usually needs a payment channel it can trust, while investors need a way to move capital into and out of a country. Banks also help businesses exchange currencies and settle transactions. If sanctions restrict those channels, imports may become harder, investment can stop, and payment services may fail. The same disruption can affect healthcare purchases and defense-related financing.

The signatories warned that such restrictions could produce unemployment, high-tech paralysis, and a dramatic decline in living standards. They cited South Africa, Iran, and Russia as examples of countries facing severe sanctions. The Bank of Israel said preserving relations with main trading partners and preventing sanctions was the right economic priority.