Israel’s prime minister says he has ordered a plan to keep the economy running through crypto if banks cut the country off. Israel’s central bank says that cannot work. The most useful evidence for who is right is not in Jerusalem. It is in what happened to a Russian exchange that tried the same thing at a far smaller scale.
What was said, and by whom
In an interview with Israel’s Economy Channel, Benjamin Netanyahu said Israel must prepare an alternative financial system that could operate around possible international banking sanctions, and that cryptocurrency and blockchain were among the options. He said he had already ordered a plan, Ynet reported. Officials in the economic ministries, and even senior figures in his own office, told Ynet they knew of no team working on one.
On Saturday, October 24, the Bank of Israel answered in an unusually direct statement: “Cryptocurrencies cannot serve as a means of circumventing sanctions.” It told the government to keep its ties with its main trading partners and to focus on preventing sanctions, according to The Times of Israel. Netanyahu replied on Channel 14: “I listen, but I do what I think is right,” The Times of Israel reported.
The test case: Garantex, in four dates
Garantex was a Moscow-linked exchange built, in effect, to move money around Western rules. US prosecutors say it even moved its operating wallets to new addresses every day so US exchanges could not spot and block it, per the Justice Department. Here is how that ended.
| Date | What happened | Source |
|---|---|---|
| April 5, 2022 | US Treasury (OFAC) sanctions Garantex | DOJ |
| February 24, 2025 | EU adds Garantex to its 16th Russia sanctions package | Reuters |
| March 6, 2025 | Tether blocks wallets holding over 2.5 billion roubles (about $27-28 million); Garantex suspends all services | Reuters, Cointelegraph |
| March 6-7, 2025 | US Secret Service seizes its domains and freezes over $26 million; Germany and Finland take its servers offline | Secret Service |
Our count: 10 days passed between the EU listing and the freeze that shut the exchange down. That was an exchange the Secret Service says had processed at least $96 billion since April 2019.
The lesson is not that crypto can’t move. It is that the dollar stablecoins a sanctioned economy would actually need are issued by companies that freeze on request. Tether says it aligns with the US OFAC sanctions list and had frozen more than $2.5 billion of USDT tied to illicit activity by March 2025, in its own statement.
Where the plan breaks
Yair Avidan, a former Bank of Israel supervisor of banks, put it plainly to Ynet: moving a payment onto a blockchain “does not make sanctions disappear.” The payment still has to pass through points that obey the law:
- Getting in: shekels become crypto through banks and exchanges that screen against sanctions lists.
- The token itself: dollar stablecoins can be frozen by their issuer, as Garantex found.
- The other side: a foreign supplier still has to agree to be paid, and its own bank still has to take the money.
- Getting out: crypto becomes usable cash only through another regulated exchange or bank.
Bitcoin itself has no issuer to freeze it, but its price swings make it a poor way to pay for fuel or medicine, a risk economist Yair Zimon raised when he warned of a sharper shekel fall and disrupted imports.
What it means for Indian investors
Nothing in this story changes bitcoin’s price directly. The practical point is about USDT, which many Indian traders hold on exchanges. The freeze power that stopped Garantex applies to every USDT address, not just sanctioned ones, so treat a stablecoin as a claim on a company that follows US rules, not as cash beyond anyone’s reach. Gains on it are still taxed at a flat 30% plus cess in India, with 1% TDS on transfers. You can track the dollar peg on our Tether price page.
BtcMedia verdict: A country can use blockchains, but it cannot use them to leave the banking system, because every useful exit runs back through it. Garantex spent nearly three years under US sanctions shifting wallets daily, and still lasted 10 days once Europe acted.
How we calculated this: days counted from the EU listing date reported by Reuters (February 24, 2025) to Tether’s freeze on March 6, 2025. Statements checked on October 25, 2026, around 2:50 AM IST.
FAQ
Did Israel actually adopt a crypto sanctions plan? No. Netanyahu said he ordered one, but ministry officials told Ynet they knew of no such plan, and the Bank of Israel opposed the idea.
Can Tether freeze any USDT wallet? Tether’s freezes have covered addresses tied to sanctions and crime, and it says it aligns with the US OFAC sanctions list. The Garantex case shows it can act within days.
Does this affect bitcoin prices in India? Not directly. It is a political statement, not a market event, and no policy has been adopted.
This article is for information only and is not financial advice.