'BibiCoin policy': Netanyahu faces backlash over plan to use crypto to bypass sanctions

Netanyahu’s “bypass economy” meant preparing an alternative way to make payments if foreign governments imposed sanctions on Israeli banks. He confirmed that cryptocurrency was part of the idea and added blockchain technology as another possibility. The proposal mattered because sanctions could restrict access to ordinary international finance.

The suggested mechanism was to use digital assets or blockchain-based systems instead of relying fully on sanctioned banks. Netanyahu said he had asked advisers to prepare a plan. However, the article does not describe a completed system, a specific cryptocurrency, or a workable technical design.

The Bank of Israel rejected the idea, saying cryptocurrencies cannot bypass sanctions. Netanyahu later said he would consider the bank’s advice but follow his own judgement. The proposal therefore remained a disputed contingency plan, not an operating alternative to Israel’s established financial relationships.

Cryptocurrency is a digital asset used for payments or transfers, while blockchain is a shared digital record that records transactions. A cryptocurrency may use a blockchain, but blockchain can also support systems that are not currencies. This distinction matters because Netanyahu mentioned both as possible alternatives to ordinary banking.

Ordinary bank money appears as balances in accounts, and banks process payments through established financial networks. Those banks and networks are connected to regulators, central banks, and international institutions. By contrast, many cryptocurrency systems use distributed records and software rules rather than one central bank or payment operator. In practice, users may still rely on exchanges, banks, or other services.

That difference does not automatically make cryptocurrency independent of sanctions. Governments can restrict exchanges, financial institutions, and access points. The Bank of Israel therefore rejected the idea that crypto could provide a dependable route around sanctions, even though blockchain technology works differently from conventional banking.

The Bank of Israel’s central objection was reliability. It stated that cryptocurrencies “cannot be used as a route for bypassing sanctions.” That means digital assets were not viewed as a dependable substitute for the banking relationships and international payment channels that sanctions might disrupt.

A cryptocurrency transaction may be recorded on a blockchain, but users generally need ways to buy, sell, convert, and spend the asset. Those access points can involve exchanges, banks, businesses, or other regulated services. Governments can pressure or restrict such services. The article does not identify a specific technical failure, but the bank’s statement rejects crypto as a practical sanctions solution.

Instead, the central bank urged the government to maintain economic relations with Israel’s principal trading partners. It warned against measures that could damage the economy. Netanyahu said he would consider the advice, but also said he would ultimately follow his own judgement.

The proposal faced unusually broad opposition. The Bank of Israel rejected it publicly. On Sunday, more than 100 economists signed a warning letter. They included former Bank of Israel officials, ex-central bank governor Jacob Frenkel, and several Nobel laureates. Their criticism extended beyond a single institution or political faction.

Political opponents also attacked the idea before Tuesday’s election. Gadi Eisenkot, Netanyahu’s main rival, called it “madness” and coined the phrase “BibiCoin policy.” Opposition leader Yair Lapid accused Netanyahu of making alarming promises about the country’s economic future. These responses showed that the proposal had become an election issue as well as a financial debate.

The exact number given was more than 100 economists, not a precise total. Together, the central bank statement, economists’ letter, and opposition attacks signalled strong concern about the proposal’s economic and strategic consequences.

Sanctions can weaken an economy by making trade, investment, and international payments more difficult. The economists warned that Israel could experience higher unemployment and falling foreign investment. They also predicted further damage to the country’s international economic standing. These effects can reduce business activity and limit available resources.

The letter cited South Africa, Iran, and Russia as examples of the economic consequences of sanctions. Its warning was broader than lost trade alone. It said Israeli living standards could deteriorate and that the state’s ability to finance its security could be undermined. In this account, economic pressure could affect households, companies, and government capacity.

The article presents these as risks identified by the economists, not outcomes already reported in Israel. Their concerns added weight to the Bank of Israel’s rejection of cryptocurrency as a workaround. They also intensified the political dispute before the election, when security and economic issues were already putting Netanyahu under pressure.

International trade usually requires trusted payment systems that connect buyers, sellers, banks, and governments in different countries. Banks help transfer money, provide credit, exchange currencies, and verify transactions. Financial networks allow these payments to move across borders. This makes trade faster and more predictable than relying on direct exchanges between individual companies.

Those networks also create points that governments can restrict. A government can limit banks’ access to foreign currency, payment systems, loans, or overseas partners. Businesses may then struggle to pay suppliers, receive earnings, insure shipments, or attract investment. The article’s concern about sanctions on Israeli banks reflects this broader dependence on financial connections.

That is why the Bank of Israel urged Israel to preserve relations with its principal trading partners. The article does not list particular payment networks or currencies. It does show the central issue: damage to banking ties could affect the wider economy, not just individual financial institutions.

The article says Israel’s settlement policy in the occupied West Bank created growing diplomatic pressure. Britain, France, Canada, and other Western countries announced measures targeting goods from Israeli settlements. Their stated concerns were settler violence and settlement expansion. Those concerns explain why settlement-related commerce became a target of foreign action.

The immediate mechanism described is economic pressure on goods from settlements. Such measures can signal opposition to the policy and make settlement-linked trade more difficult. The article does not provide details about every government’s measure, nor does it specify separate actions against Israeli institutions. It connects the pressure directly to settlement expansion and violence.

This background shaped the timing of Netanyahu’s warning about possible sanctions on Israeli banks. It also contributed to the wider dispute over Israel’s economic future. The article presents the diplomatic pressure as ongoing, while Netanyahu’s advisers were asked to prepare for a possible sanctions scenario.