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Various central banks worldwide are already in various stages of developing their own central bank digital currencies or CBDC. The Bank of Israel recently announced once more that is also considering the issuance of its own CBDC called the digital shekel aimed at making payments systems more efficient.
The Israeli central bank recently released a document titled “A Bank of Israel Digital Shekel – Potential Benefits, Draft Model, and Issues to Examine,” which detailed its action plan for the possible issuance of its own CBDC. The monetary authority also called for the public’s responses and comments on the issues surrounding its issuance.
The Bank of Israel actually started to consider the possibility of issuing its own CBDC back in 2017 and an interdepartmental was created to explore the topic. However, the team recommended against issuing a central bank digital currency in the near future saying that “no advanced economy has yet issued digital currency for broad use,” according to Cointelegraph.
While the central bank has reiterated that it has “not yet decided whether it intends to issue a digital shekel,” it has not yet abandoned the idea. In fact, the bank said that it is “accelerating its research and preparation for the potential issuance of a digital shekel” citing “rapid developments in the digital economy and in payments.”
While the bank acknowledges the risks associated with issuing its CBDC, it hinted that it is inclined to go ahead with the plan if benefits outweigh those risks. “The Bank of Israel is preparing an action plan so that if conditions develop in the future that leads to a Bank of Israel assessment that the benefits of issuing a digital shekel outweigh the costs and potential risks, the Bank of Israel will be prepared to put this plan into action,” the bank said.
Part of the action plan is the newly created Steering Committee on the Potential Issuance of a Digital Shekel, which is being headed by the Bank of Israel’s Deputy Governor. The committee is tasked with mapping out “potential advantages, various issues, and risks” involved with the digital shekel issuance.
The Bank of Israel cited several benefits in issuing a CBDC. These include a cheaper and more efficient infrastructure for cross-border payments, a payments system that is more private, and the reduction of cash use that could help fight the “shadow economy,” according to Reuters.
