The Bank of Israel is closely monitoring various scenarios that could potentially impact its decision to issue a digital shekel, the country’s central bank digital currency (CBDC). In a recent report released by the Bank of Israel’s steering committee on the potential issuance of a digital shekel, it was clarified that no final decision has been made yet on the issuance of a CBDC.
The report, which spans 21 pages, highlights that while approximately 90% of central banks around the world are currently examining CBDCs, only a small number have progressed to the point of issuance. It also notes that the central banks of Israel, Norway, and Sweden have collaborated with the Bank for International Settlements (BIS) to explore how CBDCs can be utilized for international retail and remittance payments.
The report identifies several scenarios that could potentially influence the decision to issue a digital shekel. One such scenario is the potential issuance of CBDCs by the United States or the European Union. If major global economies like the US or EU were to issue their own CBDCs, it could have implications for Israel’s decision on whether to proceed with a digital shekel.
Impact of abolishing cash usage in Israel
Another scenario that could impact the decision is a decline in cash usage. If cash becomes less commonly used in Israel, it could create a demand for a digital shekel as an alternative form of payment. The report also highlights the significant use of stablecoins as a potential influencing factor. If stablecoins gain widespread adoption in Israel, it could raise concerns about financial stability and consumer protection, which may prompt the central bank to consider issuing a CBDC as a more secure and regulated form of digital currency.
Competition in the domestic payment system is also listed as a potential factor. If there is increased competition from alternative payment systems that pose a threat to the stability and efficiency of the existing payment infrastructure in Israel, it could prompt the central bank to issue a digital shekel to maintain control over the monetary system.
Furthermore, significant technological developments in payment systems could also play a role in the decision to issue a digital shekel. If there are advancements in technology that enable faster, more efficient, and secure payment systems, it could create a favorable environment for the issuance of a CBDC.
The report emphasizes that the Bank of Israel must be prepared to advance the issuance of a digital shekel if the above-mentioned variables support it. It highlights the need for ongoing monitoring and evaluation of various scenarios that could impact the decision-making process.
