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Israel has already started testing their own central bank digital currency

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Vandana Mrigwani Follow

CBW -External Analyst

INDIA

Jun, 23 2021

Jun, 23 2021

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The Bank of Israel has already issued a central bank digital currency through a pilot test of a digital shekel. The idea of issuing such a currency has going around since 2017, but Israel has fast tracked the development process. 

 

According to a report from Jerusalem Post where Bank of Israel Deputy Governor Andrew Abir said accidently that Israel has already conducted a pilot test of their own CBDC which is the digital Shakel. The Governor was speaking at a conference of the Fair Value Forum of IDC Herzliya 

 

Deputy Governor Abir added that he was not optimistic that Israel would launch a central bank digital currency. He said, “I had previously estimated that the chance of having a CBDC within five years is 20%,” and told “My estimate has increased a bit in the last year, mainly because other countries are advancing with it too. But still there is less than a 50% chance.” Deputy Governor Abir added that he was not confident about the bank issuing a central bank digital currency, or CBDC, despite the fact he confirmed a pilot test was underway. 

 

The Bank of Israel has made no announcement on its website about the issuance of a digital shekel at the time of publication. The financial institution stated that it was making an action plan to explore the assistance of a CBDC on the Israeli economy in the previous month. Further adding it would be ready to do so should the benefits "outweigh the costs and potential risks." 

 

The report by Jerusalem Post mentioned that Deputy Governor Abir during the conference said , “The payment system in Israel is at least a decade behind other countries , But in the last year, we have started to close the gap with the distribution of the infrastructure that allows contactless payments and the entry of digital wallets" and he said “We are in the middle of a process of disruptive technology, and we do not know who are going to be the winners. Will it be the banks, credit-card companies, fintech or big technology companies? There will be changes in the next few years that we do not yet know about. But the environment in five years’ time will not be the same as the environment today.” 

  

Further he added “I’m sorry to tell you, but it’s not going to eliminate the banks", he said "No central bank will introduce a digital currency for this purpose. The banks will still have an important part in the entire payment system. 

  

Abir shattered the idea that the digital shekel would be like bitcoin 

  

“Another thing that might disappoint you is that any digital currency of a central bank would not be designed as a kind of protection against bitcoin. What we are talking about is a payment system. Bitcoin is not a payment system, and it is not a currency. In the best situation, it is a financial asset, and in the worst case, it is a pyramid scam,” Abir said. 

 

In May, the Bank of Israel specified it was arranging an action plan for how it could offer a digital currency. The notion of issuing such a currency has been in discussion since 2017. Later it was streamlined to quicken its research and preparation for the possible issuance.  

 

At the time, the central bank specified it may contemplate issuing a CBDC if such meets the requirements of the future digital economy. It delivers more effective cross-border payments. The Bank of Israel also hopes to lessen the use of cash and confirm the public can make payments with "a certain level of privacy."


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Vandana Mrigwani

CBW - External Analyst

INDIA

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