Prime Minister Benjamin Netanyahu suggested that cryptocurrencies could be used to evade potential banking sanctions. The Bank of Israel quickly rejected the idea, emphasizing the need to preserve economic relationships with key trading partners.
Israeli Web3 leaders said the proposal could harm the domestic ecosystem. Tomer Sharoni, chief executive of blockchain‑intelligence firm Addressable, warned that describing crypto as a sanctions‑busting tool may trigger extra scrutiny from compliance officers abroad, making onboarding, banking and fundraising more difficult for legitimate founders. Ran Hammer, chief executive of Orbs, added that political commentary from officials who lack technical understanding could damage the market’s reputation.
Both executives noted that while sanctioned states have used crypto to circumvent restrictions, such activity leaves a trace on public ledgers and is subject to anti‑money‑laundering rules. They argued that on‑ and off‑ramps already apply AML controls and would not process sanctioned transactions.
Regulatory Gaps and Enforcement
Sharoni identified three missing components in global sanctions enforcement: real‑time cross‑chain attribution, standardized risk‑signal sharing, and uniform Travel Rule enforcement. He said current screening often links wallets to sanctioned parties only after lists are updated, and each exchange or stablecoin issuer conducts screening independently.
Hammer said existing mechanisms already allow exchanges, stablecoin issuers and analytics firms to screen wallets in real time and freeze flagged funds, though he acknowledged that better coordination would improve the system.
Calls for a Sandbox and Clear Licensing
Industry leaders urged the Bank of Israel, the Israel Securities Authority and the Capital Market Authority to create a regulatory sandbox that follows the European Union’s Markets in Crypto‑Assets (MiCA) framework. They also called for clear licensing rules for virtual‑asset service providers that comply with the Financial Action Task Force Travel Rule, enabling Israeli firms to operate internationally without relocating.
Sharoni highlighted Israel’s strengths in cryptography, cybersecurity and fintech, but said the lack of appropriate regulation forces many crypto businesses to operate abroad.
