Israel’s Central Bank Considers Digital Shekel

The Central Bank of Israel is working on a project for the possible issuance of a digital central bank currency. The central bank’s steering committee has presented various options for the development and use of the digital version of the national currency, the shekel, according to an official statement from the bank.

However, it is not yet known whether Israel will actually take the step to launch its own CBDC (Central Bank Digital Currency). Various factors will influence the decision.

Read more about the possible launch of a digital shekel by Israel’s Central Bank, and find other important business news with the Born2Invest mobile app.

Central bank warns against private stablecoins

These include questions about how frequently digital currencies will be used, whether the use of cash will shrink, the extent of competition in the domestic payment system, and, last but not least, what other countries are doing in this area.

The Central Bank Committee expressed concern that increased adoption of stablecoins could “adversely affect the payment system,” pointing out that private stablecoins such as Tether (USDT), which have no peg to the domestic currency, could hurt money transfers.

Use of cash declines

The Bank of Israel noted that the use of cash in the country is declining, which is also one of the drivers of CBDC’s development. People in the country still use cash for a large portion of their transactions. However, a change in payment habits could lead to less use of fiat currency issued by the central bank.

A CBDC could be a viable solution, as the bank does not want the scenario described above. It also does not want the payment system to be controlled by private companies.

Promoting competition in the payment system

The bank’s statement said, among other things: “The continued concentration in some segments of the domestic payments system due to the dominance of a few participants, the incomplete competition in the deposit market, and the relatively high barriers to entry may justify the issuance of a central bank digital currency to promote competition in the payments and financial system in the digital age.”

Initiatives by other countries

Israel is influenced by the actions of the United States and the European Union. If another country begins issuing its own digital central bank currency, Israel could choose to do so as well.

In terms of cryptocurrency regulation, Israel seems to want to follow in the footsteps of the United States. The country’s securities regulator proposed legislation earlier this year that would categorize cryptocurrencies as securities, CoinTelegraph reported.

The move did not come without criticism. Crypto enthusiasts blatantly oppose the proposed legislation and said its passage could destroy the industry.

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(Featured image by 696188 via Pixabay)

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First published in  CRYPTOMONDAY, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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