Israel’s central bank has pushed back on suggestions to use digital assets to bypass potential sanctions amid prolonged geopolitical tensions. In recent years, countries sanctioned by most Western governments have turned to the asset class to help protect financial institutions and the local economy.
Israel’s Opposition Piles Up Pressure
Prime Minister Benjamin Netanyahu is considering deploying blockchain technology if key trading partners sanction the country. This comes after growing criticism of settlement expansion in the West Bank and increasing reports of violence.
Netanyahu described blockchain as one alternative, but the central bank and other economists are not convinced by the approach. Per local reports, he would take the bank’s position into consideration but will do what’s best for the country.
In a statement, the bank said crypto cannot circumvent sanctions with the right legal action, maintain economic ties between trading partners, and avoid negative impacts on the economy. The UK, France and Canada have threatened sanctions after prolonged geopolitical tensions.
Both economists and opposition leaders have openly criticized the crypto plan, citing economic data. Former central bank governor Jacob Frenkel, along with more than 100 economists, signed a letter warning of unemployment and dwindling foreign investment as the country turns to digital assets.
Furthermore, experts questioned how practical the plan could turn out considering other nations that have deployed digital assets. “It’s not possible to circumvent sanctions with digital currencies as the blockchain system is publicly open and transparent, which means that every transfer is registered and can be traced to its origin.”
This year, Defense Minister Israel Katz announced sanctions on 37 crypto wallets linked to Iran, stressing that they would continue clamping down on all funding routes. This shows that blockchain transactions can be tracked and are not an effective way to bypass sanctions.
Meanwhile, opposition leaders like Gadi Eisenkot and Yair Lapid hammered the plan, describing it as “madness,” “Bibicoin policy,” and a “bypass economy” respectively.
Several nations have turned to digital assets to circumvent sanctions, raising scrutiny around the asset class.
After Russia’s invasion of Ukraine and the resulting sanctions, the government and financial institutions softened their stance on Bitcoin and private digital assets. United States lawmakers have called for stricter rules around Bitcoin and stablecoins.