‘Irreversible damage’: Top economists ‘gravely concerned’ at Netanyahu touting crypto to beat sanctions

A group of 109 senior economists, business executives, and former public service officials expressed “grave concern and anxiety” Sunday after Prime Minister Benjamin Netanyahu said Israel should prepare for potential international sanctions on its banking system, and for the use of cryptocurrencies to circumvent them.

In a statement, the Economists’ Forum for Democracy called the proposal “puzzling,” and warned that Netanyahu is knowingly leading Israel toward international economic boycott and isolation, which will cause “irreversible damage.”

The forum warned that sanctions on the Israeli banking system would mean that corporations, exporters, investors and, above all, the tech sector will be unable to operate.

“Unemployment will surge, foreign investments will vanish entirely, and Israel’s global economic standing will collapse,” the forum cautioned. “Beyond the catastrophic macroeconomic impact, Israeli citizens will be harmed: Israelis will not be able to use credit cards, international e-commerce platforms (such as Amazon and AliExpress) will be blocked to Israeli customers, and foreign workers will abandon the country en masse due to their inability to remit funds to their families.”

“The healthcare system will be unable to procure medical equipment and medications,” the forum added.

Citing countries such as South Africa, Iran, and Russia that have been subject to economic sanctions, the forum noted that these have led to a decline in citizens’ standard of living and in the state’s capacity to finance defense and protect itself against its adversaries.

The forum joined the Bank of Israel, which on Saturday rejected Netanyahu’s proposition, saying that cryptocurrencies “cannot be used as a route for bypassing sanctions.”

Among the signatories of the forum’s letter were Prof. Jacob Frenkel, former governor of the Bank of Israel; Prof. Zvika Eckstein and Prof. Avia Spivak, former deputy governors of the Bank of Israel; Yair Avidan, former supervisor of banks; Prof. Avraham Ben-Bassat, David Brodet, and Yarom Ariav, former Finance Ministry director generals; Prof. Manuel Trajtenberg, former head of the National Economic Council; Prof. Eytan Sheshinski and Prof. Reuben Gronau of the Hebrew University; and Prof. Itai Ater of Tel Aviv University.

The letter came two days ahead of Israel’s Knesset election, on Tuesday.

In an interview with the Channel 10 economic network on Friday, Netanyahu noted “that there could be banking sanctions” imposed against Israel by the international community. He then said that crypto and the blockchain — a decentralized digital system that does not rely on central government authorities — could be options for facing the challenge, and that he had asked his advisers to prepare a plan for their utilization.

Cryptocurrency can weaken the effectiveness of financial sanctions by creating alternative payment channels, but it is not foolproof, as transactions on many blockchain networks can still be traced.

Netanyahu’s remarks came after Britain and 11 other Western countries recently announced sanctions targeting goods from Israeli settlements in the West Bank, in response to a wave of settler attacks on Palestinians and massive settlement construction approved by Netanyahu’s hard-right government.

While the UK-led sanctions are designed to specifically target the settlements, economists and industry figures interviewed by The Times of Israel last month warned that the economic repercussions could extend into Israel proper.