Netanyahu Asked for a Blockchain Plan Against Sanctions. 3 States Tried It, and the Chokepoint Was Never the Chain

What Happened

Prime Minister Benjamin Netanyahu told Israel's Channel 10 on Friday, October 23, 4 days before the Knesset election, that the country should prepare for the possibility of banking sanctions and build financial channels that could work around them. Asked whether blockchain was one of those channels, he answered 'one of them, certainly,' and said he had already asked for a plan to be prepared.

He named no ministry, network, currency, or date. In the same interview he said that United States military aid, $3.8 billion a year under a memorandum that runs through fiscal 2028, would not continue indefinitely. The remarks followed the United Kingdom's September 8 package against West Bank settlements: an import ban on settlement goods, sanctions on people and firms tied to building and financing them, and, per Axios, 11 other governments announcing trade restrictions of their own.

None of those measures touches an Israeli bank.

The Bank of Israel answered on Saturday, October 24, in a statement quoted by Bloomberg, Ynet, and The Times of Israel: 'Cryptocurrencies cannot serve as a means of circumventing sanctions on Israel.' The right course, it said, is to preserve ties with the country's main trading partners and work to prevent sanctions, a matter for the political leadership.

Ynet reported that officials in the economic ministries had never heard of the plan Netanyahu said he had ordered, and that senior staff in the Prime Minister's Office knew of no team working on it. Avi Simhon, who heads the National Economic Council, told Calcalist the prime minister 'is genuinely thinking about this.'

Netanyahu replied later on Saturday that he would take the criticism into account, and described crypto as 1 possible means among several that might never be used.

A central bank told its government that a chain cannot carry an economy past its banks, and the record of 3 states says it is right. The same 3 chokepoints sit in every holder's stack. Know which of your assets carries one, and where the asset that carries none still has to stop.

3 States Tried the Workaround. 3 Different Layers Stopped Them

The central bank did not argue its case. The record does. Venezuela launched the Petro in 2018 as an oil-backed token sold as a way around United States sanctions. Washington's answer, Executive Order 13827 of March 19, 2018, did not attack the chain: it barred US persons from any dealing in a digital currency issued by or for the Venezuelan government, so no exchange that valued its dollar access would touch the token.

The Petro traded inside Venezuela until the government shut it down in January 2024. Russia's A7A5, a ruble stablecoin issued by a Kyrgyz company against deposits at the sanctioned state-owned Promsvyazbank, moved more than $102 billion in its first year by Elliptic's count. Then the Office of Foreign Assets Control (OFAC) designated its issuer and its main exchange, Grinex, in August 2025, the UK and the European Union followed before the year ended, Grinex halted in April 2026 with customer balances inside, and Elliptic measured average daily volume down 96% from its peak by June.

The token's contracts on Ethereum and Tron never stopped. The venues that turned it into anything else did.

Iran is the case closest to what Netanyahu described, a state moving value through dollar stablecoins because its banks cannot, and it shows the third layer. When OFAC designated 2 wallets of the Central Bank of Iran in April, Tether froze about $344 million in them; when 4 more addresses were added on July 16, another $131 million was frozen at once.

Nothing on the ledgers changed; the issuer's freeze authority did the work. The contrary case is real: Chainalysis attributes more than $3 billion to addresses linked to the Islamic Revolutionary Guard Corps in 2025, predominantly in stablecoins, and the Senate report that prompted Tether's reply this month counted 34 Hezbollah-linked wallets that stayed open for 9 months.

A freeze needs an attribution first, and attribution lags the flow. A state willing to be a pariah, to route through nominee wallets and unlicensed venues and absorb losses when attribution catches up, can keep some money moving. The Bank of Israel's point, and former banking supervisor Yair Avidan's, is narrower and, for a trading economy, decisive.

The counterparty who sells Israel a turbine or buys its chips still clears through a bank whose obligations do not change because the payment instruction arrived on a chain. Blockchain, in Avidan's words, moves the bottleneck. It does not remove it.

What a State Rail Would Need, and Why Nobody Owns the Plan

Strip the interview to its engineering and there are 3 designs, each already tested. A rail built on someone else's stablecoin inherits issuer control: Tether's chief executive, Paolo Ardoino, said on Monday, October 19, that his company has frozen flagged addresses an average of 4 weeks before OFAC designated them, and Circle's USDC comes under direct European Banking Authority supervision on November 12.

A sovereign that expects sanctions from Washington or Brussels cannot build on a switch those capitals can reach. A rail built on Israel's own shekel token is A7A5 by another name: a claim on deposits at a domestic bank, which inherits whatever status that bank is given. A rail built on bitcoin has no issuer to designate, the 1 piece of the design that works as advertised, but it runs on a public ledger.

Nir Hirshman of the Israeli Crypto Companies Forum said crypto 'is not a hiding place' because every transaction can be tracked; Avigdor Liberman made the same point as an objection, that wallets tied to a sanctioned party can be identified and blocked at the exchange. Bitcoin would let the state hold value no one can freeze.

It would not get the state's suppliers paid in anything their banks accept.

The politics explain the vacuum. Yarom Ariav, a former director general of the Finance Ministry, said that proposing workarounds puts Israel in the company of isolated regimes like Iran. The Bank of Israel's statement reads best in that light: not a technical finding about ledgers, but a central bank telling counterparties abroad, in the week before an election, that the banking system it supervises intends to stay inside the correspondent network it depends on.

Whether a plan exists on paper rests, as of this writing, on the prime minister's account alone.

What This Means for You

The useful thing a central bank did this weekend was draw a map, and it is the same map a holder needs. A crypto position has at most 3 conditional parts: an issuer, who can freeze the unit; an exchange, which can be designated or can close your account against a list you cannot read; and a bank at the fiat edge, whose clearing obligations do not change because your side of the trade was on a chain.

Each of the 3 state rails above failed at 1 of those 3. Inventory your own stack by the same test. Stablecoins and wrapped tokens have an issuer, and they carry issuer control wherever you hold them, hardware wallet included. Anything at an exchange is custodial risk and a jurisdictional contact point in one.

Anything that must become rent or payroll meets Avidan's clearing chokepoint, which is yours too.

The unconditional part is also the same for a state and a citizen: a bearer asset held in your own keys, with no issuer to designate and no account to close. Bitcoin in self-custody passes the test the Petro, A7A5, and Iran's dollar wallets failed. Name its ceiling with the same honesty.

Private keys decide who can move the coins; they do not decide whether the exchange or the bank at the edge will take them, and a public ledger means the path to that edge is visible to anyone who looks. For an individual that ceiling is manageable in a way it is not for a trading economy: keep stablecoins as working balances rather than savings, keep the savings in self-custody, know which jurisdictions your on-ramps and off-ramps answer to, and keep exchange balances small enough that a compliance hold costs time rather than solvency.

If you hold or move value in Israel, nothing has changed yet. The UK's measures target settlements, not banks; the European Union's effort to suspend parts of its association agreement with Israel has not gathered the 15 governments it needs; and the prime minister's own Saturday statement was that the plan might never be used.

What did change is that the central bank said, in public, which side of the chokepoint it stands on. A holder who wants a position that does not depend on that choice already has the tool, and already knows where it stops.

What to Watch

Tuesday, October 27, is the first checkpoint: the election decides whether the person who asked for the plan is in a position to receive it. If the National Economic Council or any ministry publishes a document, its choice among the 3 designs above will say more than the interview did.

The UK's settlement legislation is expected, per the House of Commons Library, to be in force within 6 to 9 months, and whether it names any financial institution would turn a contingency into a case. On the issuer layer, the European Banking Authority's direct supervision of USDC begins November 12, 1 more date on which a stablecoin rail becomes more conditional rather than less.

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