The Bank of Israel emphasized its cautious approach to launching the digital shekel, preferring to monitor developments surrounding the digital euro first. Israel’s central bank is holding off on decisions regarding the digital shekel, waiting to see Europe’s central bank move forward with the digital euro first.
In a Reuters interview, Bank of Israel Deputy Governor Andrew Abir highlighted Israel’s interest in observing the European Central Bank’s potential issuance of a digital euro by 2027.
Abir emphasized the key consideration of public adoption, noting the significant challenge in moving from theoretical studies to convincing widespread use. The Bank of Israel began researching the digital shekel in 2017, aiming to understand both the potential advantages and challenges involved in introducing a central bank digital currency (CBDC).
The initial phase focused on understanding global trends in digital currencies, assessing technological feasibility, and analyzing potential impacts on monetary policy and financial stability. In 2021, the Bank of Israel intensified its efforts by forming a dedicated task force to further explore and advance the digital shekel.
In late May, the Bank of Israel launched the Digital Shekel Challenge, inviting various sectors to develop applications for a potential central bank digital currency. The pilot aims to evaluate the digital currency using a technological prototype simulating the core system of the digital shekel and its API layer.
Abir highlighted the central bank’s goal for a CBDC to establish a “level playing field for payment providers,” enabling them to compete with financial institutions. He noted that a CBDC offers advantages such as eliminating credit exposure to payment providers since they do not hold customer funds. This approach, according to Abir, allows for lower levels of oversight and capital requirements compared to traditional payment providers.
