The latest move by Bank of Israel is a policy reversal on three years ago when it recommended against issuing any digital currency.
Bank of Israel announced today that they would be releasing a digital shekel. Deputy Governor Andrew Abir is intensifying efforts to examine the possibility of issuing central bank digital currencies, or CBDCs. The banks steering committee, headed by Abir, issued a draft model today which discusses the characteristics of a digital Shekel.
A significant development
While the report released today stresses that the bank has not definitively agreed on issuing a digital currency, this is a significant development. The plan of action proposed by the steering committee represents a reverse in policy from three years ago when recommended not issuing any type of digital currency.
Then, Governor Karnit Flug set up the committee to examine the possibility of digital currencies. At the time, they ruled against issuance in “the near future.” However, they have been forced to re-evaluate this position considering major developments globally and within Israel regarding payments. For instance, Apple pay entered Israel just last week.
How they came to this conclusion
The steering committee’s report noted six major motivations for issuing a digital currency:
- “Creating another efficient, advanced, and secure alternative to the existing and new means of payment in the digital age.
- Creating an innovative technology that will ensure the adaptation of the payment system to the needs of the future digital economy.
- Ensuring adequate redundancy of the payment system and its proper functioning during emergencies or breakdowns.
- Creating an efficient and inexpensive infrastructure for cross-border payments.
- Maintaining the public’s ability to use digital means of payment while ensuring a certain level of privacy.
- Support of government policy to reduce the use of cash in the struggle against the shadow economy.”
Interestingly, the report alludes to embracing the digital transformation, something which former supervisor of Banks Hedva Ber had promoted while in her role between 2015 and 2020. Ber is now deputy CEO of eToro.
This announcement comes at a time when global discourse around CBDCs is at an all-time high on the back of a hot cryptocurrency market. Just last month, the Bank of England advertised a job for a senior expert on CBDCs, apparently showing their intention to move forward with similar plans.
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