Israel Eyes Blockchain as a Sanctions Escape Hatch
Benjamin Netanyahu says Israel must prepare a “bypass economy” for possible banking sanctions, and that he has asked for a plan using blockchain as one of the tools.
Key Takeaways
Netanyahu: Israel must organise a “bypass economy”
No token, network or timeline named yet
UK plans action on services financing settlements
OFAC: crypto carries the same sanctions duties
He made the comments in an October 23 interview with Channel 10’s Roi Katz.
A “bypass economy”
Asked how worried he was about economic sanctions against Israel, Netanyahu said he was, and that banking sanctions were possible. He then pointed to “the currencies that get around this” and said he was working on that as well.
“You need to organise a bypass economy.”
Benjamin Netanyahu to Channel 10, translated from Hebrew
When Katz asked whether blockchain was the alternative, Netanyahu answered “one of them, certainly,” and said he had already asked for a plan to be prepared. Channel 10’s report does not name a token, network, operator or timeline. Netanyahu also told Katz that Israel should not expect to keep receiving U.S. defence aid on the scale of the tens of billions of dollars it has received before, because America has changed.
What Britain has announced
Britain’s latest measure is narrow, and the interview did not connect Netanyahu’s remarks to it. On October 19, UK Foreign Secretary Ed Miliband said Britain had created new powers to sanction individuals and companies involved in building settlements such as E1, which the UK government describes as illegal, and urged businesses not to bid in the tender.
Miliband also restated plans for legislation banning goods from settlements and for “action on services that finance or facilitate them.” That is the finance-related part of the UK’s approach, and it targets settlement activity, not Israel’s banking system.
Who can stop a crypto payment
A blockchain can move tokens without a bank, but the points where money enters and leaves still answer to regulators. The U.S. Treasury’s Office of Foreign Assets Control says sanctions obligations for people under its jurisdiction are the same whether a payment is made in digital currency or traditional money.
| Payment rail | Who can block it | How |
|---|---|---|
| Dollar stablecoins | The issuer | Blocking addresses and freezing tokens, including on government orders |
| Exchanges and banks | The platform and its regulators | Identity checks, sanctions screening, refusing to convert or pay out |
| The network itself | Sanctions authorities | Designating the issuer, exchange or operators behind it |
Circle’s USDC terms let it block addresses and act on valid government orders, and conversions into bank money require identity checks even in regulated markets, as with EEA holders redeeming USDC through Circle’s French entity.
Russia offers a recent example of crypto rails under sanctions pressure. After law enforcement shut down the Russian exchange Garantex in March 2025, Tether froze about $28 million in USDT belonging to its customers, according to blockchain analytics firm Elliptic. In August 2025, OFAC sanctioned the issuer of A7A5, a ruble-backed stablecoin used for cross-border payments, along with Grinex, the exchange set up by Garantex’s operators. Elliptic warns that businesses with even indirect exposure to the token can face sanctions risk. Israel is not under the kind of broad sanctions regime Russia faces, but the case shows where crypto payments can be cut off.
Where the Bank of Israel fits
Netanyahu did not say who would draw up the plan. The Bank of Israel already runs a digital-shekel project, though nothing in Channel 10’s report links it to his request. Elsewhere in the interview, Netanyahu said he “unequivocally” disagrees with Governor Amir Yaron’s warnings about the growing defence budget, and defended an additional NIS 400 billion for defence over the coming years.
What to watch
Who owns the plan: whether the Finance Ministry, the Bank of Israel or another body is tasked with preparing it.
What it is for: a general backup if payment channels are disrupted, or a response to targeted measures such as Britain’s.
The UK’s next step: how far its planned action on settlement-financing services reaches into banking.
This article is provided for informational purposes only and does not constitute legal, financial or investment advice.
Alexander Zdravkov is a market analyst and crypto journalist with interests in economics, broader financial markets and digital assets. His journey into crypto began more than four years ago, driven by a fascination with the rapid evolution of blockchain technology and the transformative potential of decentralized finance. He began analyzing market cycles and identifying emerging trends before they reach the mainstream. He holds a degree in International Relations - a background that helped shape his broader perspective on global economics, geopolitics, and the interconnected nature of modern financial markets. Whether covering the latest developments in the crypto sector or exploring broader macroeconomic themes, Alexander focuses on giving readers context rather than simply repeating headlines. During his career, he has authored more than 5,000 articles covering cryptocurrencies, traditional finance, and global market developments. His work spans everything from Bitcoin and altcoins to macroeconomic trends influencing risk assets worldwide.
