Israeli Study Group Advises Against Establishing Nationwide Cryptocurrency Token

Israeli Study Group Advises Against Establishing Nationwide Cryptocurrency Token

The Bank of Israel commissioned a research study last year to learn about the possibility of using cryptocurrency that would have a near-equal value to the shekel. This proposed currency, which is being called the “Digital Shekel,” may not meet the needs of consumers in the area, which is why the report suggested that the bank refrains from its issuance for now.

The team was a combined group of members from the finance ministry and the central bank for Israel, though it was supervised by BoI governor Dr. Karnit Flug. Their mission was to see the advantages and disadvantages in issuing a digital currency from the Israeli Central Bank. Some of the positive effects included that it would give them payments that happen almost instantly, and that it would improve their tax receipts.

Ultimately, these reasons were not enough for the Bank to decide for the cryptocurrency. An announcement today showed that the idea of eventually adding a cryptocurrency is not off the table, adding,

“The team does not recommend that the Bank of Israel issue digital currency in the near future. It is necessary to continue examining the field and to follow developments around the world before there are proper grounds for a decision to recommend issuing digital currency.”

Even with many central banks around the world examining the concept of issuing their own CBDCs or integrating distributed ledgers in their payments, there has yet to be an advanced economy that has done so for general use. Right now, the only country that even has established a nationwide CBDC program is Venezuela, though there have been many failures and controversial interactions reported since it was launched.

The Bol believes that the use of a CBDC would be helpful in keeping the liability of the central bank transparent, just in case they suffer reduced cash usage like Sweden has. However, they are not face with this kind of impending doom at the moment, so there are plenty of protocols to prevent such a situation from occurring. Adding the Digital Shekel would also improve the quality of payment systems, but that is not the main purpose of using a CBDC in the first place.

Furthermore, the simple concept of adding in these types of digital currency comes with complications that could disrupt the currency Israeli financial system in place. The only way that the government will be keen to add CBDCs is with the certainty that the risks are low enough to control.

The original report is written in Hebrew, but the English version can be viewed at https://www.boi.org.il/en/NewsAndPublications/PressReleases/Documents/Digital%20currency%20executive%20summary.pdf.