Digital Shekel: Israel’s Journey Towards CBDCs

Digital currencies have been the talk of the town for a while now, and Israel is no stranger to this phenomenon. The Bank of Israel, the country’s central bank, has been exploring the possibility of a digital shekel for some time now. In this article, we’ll take a closer look at Israel’s journey towards a central bank digital currency (CBDC) and what it means for the country’s economy.

What is Digital Shekel?

A digital shekel is a form of digital currency that would be issued by the Bank of Israel. It would be backed by the Israeli government, just like the physical shekel. However, unlike traditional money, it would exist only in a digital form. The idea is to provide a more efficient and secure way of making payments, as well as to counter the rise of cryptocurrencies such as Bitcoin.

Pilot Test

The Bank of Israel has already conducted a pilot test of a digital shekel cryptocurrency. Bank of Israel Deputy Governor Andrew Abir revealed this during a conference, perhaps inadvertently, of the Fair Value Forum. Abir also said that the Bank of Israel was considering issuing a digital currency as part of a “second phase” of its efforts in the area. However, no timeline was provided for when the digital shekel would be launched.

Anonymity of Digital Shekel

The Bank of Israel has been experimenting with technology that would allow some CBDC payments to be made anonymously. In a recent report, the bank said that it had developed a prototype system that would enable users to make anonymous payments in digital shekels up to a certain limit. The system is based on a “double-layer” approach, where only the central bank knows the identity of the payer and the payee.

Impact on the Israeli Economy

The introduction of a digital shekel could have far-reaching implications for the Israeli economy. For one, it would make payments faster and more efficient. It would also help reduce the country’s reliance on cash, which would have a positive impact on the fight against money laundering and other illegal activities. Additionally, the digital shekel could help Israel become a leader in the digital currency space, attracting businesses and investors from around the world.

Conclusion

The Bank of Israel’s exploration of a digital shekel is a sign of the times. As more and more countries look to explore CBDCs, Israel is taking the necessary steps to ensure that it is not left behind. While it is still unclear when the digital shekel will be launched, the country’s central bank is making steady progress towards this goal. It will be interesting to see how the introduction of a digital shekel will impact the Israeli economy and what it means for the wider world of digital currencies.

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