Israel Releases Working Paper on Possible Digital Shekel Program
Bank of Israel Accelerates CBDC Research Efforts
This follows the release of a working paper that requires feedback. Despite its reluctance to commit to a CBDC plan, the Bank of Israel said it was only preparing an action plan, which will ensure its preparedness to launch a CBDC if the situation arrives.
The action plan would prepare it to launch the digital fiat should the benefits outweigh the costs and potential risk. Its impact could be enormous on the existing monetary system.
The working paper details a draft model for a potential CBDC and how it would operate. It details the role of the apex bank and how it would handle issuance. Local payment service providers will be tasked with distributing the CBDC. Payment providers will also be tasked with offering enhanced functionality for the CBDC, including building the technology.
The bank believes a CBDC would allow a payment system that could adapt to a digital economy and create an efficient and inexpensive infrastructure for cross-border payments. It also thinks the digital shekel can usher in a cashless society.
Israel Remains Wishy-washy on CBDC
The Bank of Israel first started examining the possibilities of a digital currency in 2017. At the time, the governor set up a group to explore the issue. Still, a year later, the central bank announced that it was not issuing one because no advanced economy had issued a digital currency.
While countries like Israel continue to slowly research and tread carefully to issue a CBDC, numerous central banks worldwide actively explore the project with increased zeal.
China has long started piloting its digital yuan project in major cities across the country. Banks in cities like Shanghai have been active in promoting the digital yuan, persuading merchants and retail clients to download digital wallets and use the digital currency.
Norway is also another country exploring CBDCs. It recently disclosed that it would start testing technical CDBC solutions. Other countries like South Korea, Japan, and the United Kingdom are positioning themselves for a potential CBDC.