Netanyahu Wants a Crypto Route Israel Shut Down for Iran

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• Netanyahu says he has ordered a plan to use blockchain and digital currencies if Israeli banks face sanctions.
• No token, budget or timeline has been disclosed, and officials say they know of no team working on it.
• Russia’s A7A5 stablecoin shows how quickly such a channel can lose access to liquidity.
• Israel has itself sanctioned hundreds of Iran-linked wallets, most of which used USDT.

Israeli Prime Minister Benjamin Netanyahu said on October 23 that Israel could face international banking sanctions and that he has already asked officials to prepare a plan for using blockchain and digital currencies to keep money moving if that happens. Asked by economics journalist Roy Katz on Channel 10’s Sogrim Shuk program whether blockchain could serve as an alternative, Netanyahu replied “One of them, certainly,” four days before Israel’s October 27 parliamentary election. The idea puts Israel on the other side of a channel it has helped close, since Israeli authorities designated most of the Iran-linked wallets that a US Senate probe found moving money in Tether’s USDT stablecoin.

הראשון לזהות?: “צריך להתארגן בכלכלה עוקפת לסנקציות בנקאיות, הבלוקצ’יין הוא חלופה, ביקשתי להכין תכניות לזה”. נתניהו בראיון לערוץ 10 על ההיערכות לחרם כלכלי בינלאומי וסנקציות כלכליות על ישראל pic.twitter.com/UJbZ8y7Sbh

— Roy Katz רועי כ”ץ (@roy_katz) October 23, 2026

A Sanctions Risk Without a Blockade

Netanyahu framed the idea around a future risk, saying Israel needs an economy that can bypass banking sanctions if they arrive. The pressure he pointed to is real but narrow so far, since Britain and 11 other Western governments recently moved against goods produced in West Bank settlements, a targeted step that leaves Israeli banks and their foreign correspondent relationships untouched. In the same interview he warned that Israel should not assume US military aid will continue indefinitely, a remark with practical weight because the current agreement, worth about $3.8 billion a year, expires in September 2028.

So far it remains a request with no token, blockchain network, budget or launch date attached, and Israeli media reported on October 24 that senior officials in the economic ministries knew of no such plan.

What Russia’s A7A5 Already Tested

Russia offers the most detailed record of a state-linked crypto workaround. A7A5, a ruble-pegged stablecoin launched in January 2025, is issued by Kyrgyzstan-registered Old Vector, holds its reserves at sanctioned Russian lender Promsvyazbank and runs on Ethereum and Tron, which allowed Russian companies to turn rubles into a token that could be swapped for Tether’s USDT and settled abroad. In an alert published this month, the US Financial Crimes Enforcement Network (FinCEN) said more than 180 entities processed at least $179.1 billion in A7A5 transactions between February 2025 and June 2026.

That headline figure overstates real trade, because blockchain analytics firm TRM Labs found that roughly a third of the token’s earlier reported activity came from circular transfers between addresses controlled by the A7 network itself. Sanctions from Washington, London and Brussels then hit the issuer and the exchanges around it, while Grinex, the venue that supplied much of the token’s liquidity, reported a hack in April 2026. By June, Elliptic estimated that average daily A7A5 volume had fallen 96% from its July 2025 peak. On October 1 the US Treasury went further and designated the A7 Network a significant transnational criminal organization.

Israel Helped Map Iran’s USDT Route

Iran is the closer comparison for any Israeli plan, since Tehran relied on an existing dollar stablecoin instead of building its own token. Chainalysis estimates that Iran-linked addresses received $7.8 billion in crypto in 2025, and Elliptic traced at least $507 million in USDT acquired by the Central Bank of Iran over the same year.

Israel sits on the enforcement side of that story, as A report released on September 28 by Democratic staff of the US Senate Permanent Subcommittee on Investigations examined 846 wallets sanctioned in connection with Iran and found that 84% transacted mainly in USDT, a share that rose to 87% among the 757 wallets designated by Israel. Tether, which says it helped freeze nearly $550 million in Iran-linked USDT during 2026, can block tokens at the issuer level, although its CEO, Paolo Ardoino, disputed the report and pointed to falling Iran-linked volumes. The Senate staff in turn faulted the company for acting too slowly on wallets that Israel and the US had already designated.

Why Tokens Cannot Replace Correspondent Banks

Banking sanctions bite through correspondent accounts, the arrangements that let an Israeli bank settle dollar or euro payments through a partner bank abroad. A blockchain transfer moves value between wallets, yet an importer still needs a supplier willing to accept tokens and a broker or exchange able to convert them into usable currency, and every one of those links can be cut. Yair Avidan, a former senior Israeli banking official, told Ynet that blockchain removes neither the legal restrictions nor the need for cooperation from payment firms and trading partners, while Tel Aviv University professor Yair Zimon warned that relying on crypto as a substitute could hurt foreign investment and Israel’s technology sector.

Where the sanctions come from would shape the outcome, since measures led by European governments would leave a dollar stablecoin such as USDT usable in practice, whereas a US restriction would bind every issuer operating under US stablecoin rules and turn Tether’s freeze function against Israeli wallets. Nir Hirschman, CEO of Israel’s Crypto Companies Forum, welcomed the discussion and argued that digital assets could speed up capital transfers, though he noted that public blockchain transactions stay fully traceable.

The Election Decides the Next Step

The October 27 vote will show whether the request outlives the campaign. A new government would have to hand the work to the Finance Ministry or the Bank of Israel and decide which assets the plan covers, and the choice between a public stablecoin, a shekel-backed token or a central bank channel would determine how exposed the system is to foreign freezes. Compliance teams at exchanges are also watching state-linked flows more closely after Chainalysis reported that sanctioned entities received about $104 billion in crypto during 2025, up 694% in a year, even as illicit activity stayed below 1% of attributed volume.

The most advanced state project in this area predates Netanyahu’s remarks, as the Bank of Israel has spent several years studying a possible digital shekel, a central bank digital currency issued and controlled at home, and its work so far has centered on domestic payments. Turning it into a sanctions buffer would still require foreign banks, exporters and brokers willing to hold or exchange it, the step at which A7A5 stalled once its liquidity providers came under pressure.