“When senior officials describe crypto as a way around sanctions, every compliance officer abroad hears that Israeli crypto flows deserve extra scrutiny. That makes onboarding, banking, and fundraising harder for honest founders,” Sharoni said, adding that the proposal could undo the reputation for security and compliance that the Israeli Web3 ecosystem has taken years to build.
Ran Hammer, CEO at Orbs, expressed surprise that crypto had been brought up in public discourse when emotions were running high. He echoed similar sentiments, adding that Netanyahu’s comments make the entire market look bad.
“It’s a shame when politicians who don’t understand the space weigh in. It makes you question what else they say,” Hammer told Bitcoin.com News.
While blacklisted countries have indeed resorted to crypto to circumvent sanctions, both Sharoni and Hammer insist it is not possible to run a national economy that way without leaving a trail every major liquidity provider can see. Furthermore, on- and off-ramps are subject to the same anti-money laundering (AML) rules as any financial institution; therefore, they will not touch sanctioned transactions.
Bridging the Global Sanctions Enforcement Gap
When asked what infrastructure or data-sharing protocols are still missing globally to flag sanctioned transactions instantly before funds exit via off-ramps, Sharoni noted that the primary gap is not onchain visibility, as public ledgers already provide that. Instead, the challenge lies in attribution speed and network coordination.
“Today, most screening links a wallet to a sanctioned person only after a list is updated, and each exchange and stablecoin issuer screens alone,” Sharoni explained.
He outlined three critical missing components: real-time, cross-chain attribution; standardized risk-signal sharing; and uniform Travel Rule enforcement.
Hammer offered a more reassuring perspective on current enforcement capabilities, emphasizing that the underlying mechanics are already effective.
“Most of it is already in place. Exchanges, stablecoin issuers, and analytics firms screen wallets in real time, and flagged funds get frozen,” Hammer said. “More coordination is always welcome, but the system works well. There will always be a few bad actors, just like in traditional finance.”
Instead of treating crypto as a sanctions-evading tool, industry leaders argue the Israeli government and central bank should develop it as a growth engine connecting Israel to the global economy. According to Sharoni, Israel already has world-class talent in cryptography, cybersecurity, and fintech, but “too much of the crypto side has to operate abroad because of a lack of proper regulation.”
To remedy this, Israel must establish a regulatory sandbox run jointly by the Bank of Israel, the Israel Securities Authority, and the Capital Market Authority. Sharoni added that the country must also establish clear licensing rules for virtual asset service providers that match the European Union’s Markets in Crypto-Assets (MiCA) framework and the Financial Action Task Force (FATF) Travel Rule, enabling Israeli companies to operate in Europe and the U.S. from day one. He also called for a fix to banking access issues that are currently pushing legitimate crypto businesses offshore.