Netanyahu Explores Blockchain to Circumvent Sanctions, Experts Skeptical
Translated & summarized from Calcalist by baba
Prime Minister Benjamin Netanyahu suggested Israel explore blockchain technology to bypass potential banking sanctions, a move met with skepticism from crypto industry leaders. While countries like Iran and North Korea use crypto to evade sanctions, experts point to blockchain's transparency and the enforceability of sanctions at conversion points. Israel's economy, deeply integrated into global financial systems, is unlikely to adopt such alternative channels, which have led to severe economic consequences for other nations. The primary concern for Israel is avoiding sanctions rather than finding ways to circumvent them.
The story in 6 lines · by baba
- Prime Minister Netanyahu suggested Israel explore blockchain to bypass potential banking sanctions.
- Experts argue public blockchains are transparent and unsuitable for circumventing sanctions.
- Several European nations and Canada have imposed sanctions related to Israeli settlements.
- Sanctioned countries like Iran and North Korea have received billions in cryptocurrency.
- Blockchain's transparency and conversion points make it difficult to truly bypass sanctions.
- Israel's economy is too integrated into global systems for alternative financial channels.
Prime Minister Benjamin Netanyahu suggested that Israel should prepare for an "economy bypassing" due to potential banking sanctions, identifying blockchain as one possible alternative. He stated in an interview that he has already requested a plan be prepared, a sentiment confirmed by his associates. However, experts like Nir Hirschman, CEO of the Crypto Companies Forum, argue that public blockchains are transparent and traceable, making them unsuitable for illicit financial activities. Currently, Israel faces no broad banking sanctions, but rather specific measures related to settlements. The UK, France, and Canada have imposed import bans and sanctions on entities and individuals involved in settlement expansion, including financial institutions. The UN Human Rights Council also updated its database of companies involved in settlements, listing 214 firms, including seven Israeli banks. While this database does not impose sanctions itself, it serves as a reference for foreign investors and banks. The European Union has not suspended its trade agreement with Israel. A significant financial risk for Israeli banks arises from "de-risking," where foreign correspondent banks may sever ties with Israeli banks perceived as financing sanctioned activities, such as settlement construction, to avoid penalties. SWIFT, the global interbank messaging network, is a critical communication system. While Iranian and Russian banks have been disconnected from SWIFT as a punitive measure, such a step against Israel would require EU consensus, which is currently unlikely. Countries like Russia, Iran, and North Korea have utilized cryptocurrency to circumvent sanctions, with sanctioned entities receiving an estimated $104 billion in crypto in 2025, a significant increase from the previous year. However, blockchain technology is not a viable solution for Israel due to its inherent transparency, the ability of stablecoin issuers to freeze assets, and the fact that conversion points for cryptocurrency back to fiat currency are where sanctions are enforced. Ultimately, Israel's economy, reliant on high-tech exports, foreign investments, and foreign currency reserves held in Western financial systems, cannot transition to the alternative channels used by sanctioned states. The article concludes that the real challenge for Israel is not how to bypass sanctions but how to avoid facing them, citing Iran's economic struggles with hyperinflation as a consequence of operating outside the global financial system.
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