Israel moves forward with plans for central bank digital currency

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Israel is moving forward with plans that could lay the groundwork for a central bank digital currency (CBDC), according to reports.

The Bank of Israel is reported to be working alongside other central banks to prepare for an eventual launch, though has yet to commit to formally introducing a digital shekel.

According to an official notice published by the central bank, the Bank of Israel said it was yet to decide whether it would introduce a digital currency in future.

“It is important to emphasize: Similar to many other central banks, the Bank of Israel has not yet decided whether it intends to issue a digital currency.”

Nevertheless, steps from the monetary regulator towards accelerating plans for a CBDC are an indicator of the direction of travel for the central bank, in common with central banks across the world, in weighing up digital currencies.

At this stage, the regulator is preparing an action plan for CBDC preparedness, in order to be ready to roll out a digital currency at a later date if deemed necessary. The initial focus is to be on assessing the pros and cons of CBDCs from a risk management perspective, taking into account the likely implications of a digital currency on the wider financial system.

“A digital shekel could generate various benefits for the Israeli economy, but issuing it also involves risks.”

The bank has also released a draft model of how its CBDC could work, open for comment with stakeholders to begin discussions towards a possible eventual rollout.

The Bank of Israel has been working on plans for CBDCs since 2017. The latest step will see the bank form a CBDC steering committee, to be headed up by the bank’s Deputy Governor, to look into the matter more closely.

To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.

See also: CoinGeek Live panel, The Future of Banking, Financial Products & Blockchain