From Decrypt · By Decrypt Agent
In brief
The Bank of Israel said crypto cannot be used to get around sanctions, after Prime Minister Benjamin Netanyahu said he was working on a blockchain-based plan.
More than 100 economists, including former central bank governor Jacob Frenkel and several Nobel laureates, warned the plan would damage Israel's economy.
Netanyahu's rivals seized on the comments ahead of Tuesday's election, with challenger Gadi Eisenkot dismissing it as a "BibiCoin policy."
Israel's central bank has rejected Prime Minister Benjamin Netanyahu's suggestion that cryptocurrency could help the country get around potential international sanctions, in a rare public rebuke days before Tuesday's national election.
Cryptocurrencies "cannot serve as a means to circumvent sanctions imposed on Israel," the Bank of Israel said in a statement on Saturday, according to the Financial Times. "The right course of action for the Israeli economy is to preserve economic relations with our primary trading partners and to focus on preventing sanctions and their negative impact on the economy," it added.
Netanyahu said in a Channel 10 interview on Friday that Israel needed to prepare for possible banking sanctions, and that he had asked for a plan to use crypto and blockchain networks to get around them. "Blockchain is one of the alternatives, certainly," he said. He did not say who was drafting the plan or which currency or network it would use.
Netanyahu later said he was taking the central bank's position into account but would do what he believed was best, The Times of Israel reported.
Countries including the UK, France and Canada have announced or pledged restrictions on trade with Israeli settlements in the West Bank, amid criticism of settlement expansion and rising settler violence.
On Sunday, more than 100 economists, including former Bank of Israel governor Jacob Frenkel and several Nobel laureates, signed a letter warning that the plan would bring higher unemployment and a collapse in foreign investment, Reuters reported. They called it "a puzzling solution, one accepted in criminal organizations, that will not help in the slightest."
Gadi Eisenkot, Netanyahu's main challenger in Tuesday's election, called the idea "madness" and said the "BibiCoin policy" would drive companies abroad, while opposition leader Yair Lapid compared what Netanyahu called a "bypass economy" to those of Iran, Russia and Venezuela.
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Crypto and sanctions
Economists also questioned whether the plan would work at all. "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," Gali Ingber, head of finance studies at the College of Management Academic Studies, told The Times of Israel.