Bank of Israel Does not Recommend Launching Bank-Backed e-Shekel

The central bank of Israel has published a summary of the work of its interdepartmental team to examine the central bank's currency and its eventual use in the country's financial system. The research is a good place for a decision to recommend issuing digital currency.

Israel's Central Bank Report Weighs Benefits and Risks of Issuing Own Digital Currency, e-Shekel

A team established by Karnit Flug, Governor of the Bank of Israel, the CBDC, only in the near future.

The document argues that it is necessary to continue examining the field and to follow developments around the world before any change of stance.

No advanced economy has yet issued a digital currency for broad use, a few central banks in those countries are in advanced stages of the feasibility of issuing their own digital currency. The Swedish government has recently published a report calling for the expected launch of the e-krona to be brought forward. Issuing a CDBC in the United States could provide the services provided by "private agents," the document argued.

The Bank of Israel, however, does not feel threatened by the current disruption caused by the cashless society and the cryptocurrency market as the "issue is not falling to Israel at this time."

"The document presents the main objectives that CBDC may have. One of those objectives is maintaining the public's access to the central bank's liability, in the event that the use of cash declines significantly in Sweden. However, this issue is not relevant to Israel at this time. Another motivation for issuing an e-shekel may be to support the payments system and make payments more efficient. Under certain specifications, and particularly if it bears interest, the e-shekel may be an additional monetary tool, but that is not a main objective of issuing it.

The central bank is based on its accessibility, the method of issuance, the extent of anonymity in its use, and the so it will bear interest. The team studied the advantages, disadvantages, and risks inherent in each option. The team found a number of material and environmental difficulties in the issuance of the CBDC, mainly about the impact on the central bank and financial system.

The team, which will continue to study the issue and follow developments around the world, listed a number of benefits of issuing an e-shekel, including the fight against the unreported economy and its use to advance the environment and the fintech sector.

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