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Public Consultations Reveal Positive Interest In Bank Of Israel’s Digital Shekel

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Public Consultations Reveal Positive Interest In Bank Of Israel’s Digital Shekel

A survey carried out by the central bank of Israel has returned mostly positive responses from stakeholders regarding the possible issuance of a digital shekel currency. Many of the participants in the public consultations support the continued development of the project, the regulator said.

Bank of Israel Releases Results From Consultations on Digital Shekel Project

Israel’s monetary authority has recently published a paper detailing the outcome of public consultations held to gather opinions from interested parties on its central bank digital currency (CBDC) project. The regulator announced it had received 33 responses, half of which from abroad and the rest from the country’s fintech community.

Most respondents have been supportive of the plan to issue a digital shekel, pointing to certain advantages such as the opportunity to encourage competition in the payments market. Then, the digital currency’s new infrastructure could spur innovation in Israel’s payments system, which critics say is now quite concentrated and features high entry barriers.

Many of the participants believe that advancing financial inclusion, something the Digital Shekel Steering Committee considers an additional benefit, should be a main motivation for the issuance of the CBDC. Some have also suggested that developing the fintech industry and reducing costs in the cash system should also be among the priorities.

The question of privacy has split the respondents, between those that insist the digital shekel should have cash-like features providing full anonymity and others who support some level of transaction confidentiality while maintaining anti-money laundering rules so that efforts to combat the unreported “black” economy are not hampered.

A number of the participants have also suggested additional use cases for the digital shekel such as the transfer of government payments, including through designated tokens that would enable payments for specific purposes. Food supply and healthcare provision are two areas where institutions and non-government organizations could employ the CBDC for dedicated transfers.

Bank of Israel announced it’s considering launching its own digital currency towards the end of 2017. The project was suspended the following year but then work resumed in the spring of 2021, when the regulator drafted a model of the CBDC, with most responses now favoring the employment of distributed ledger technology. Bank of Israel is yet to make a final decision on the digital shekel but in March it said it did not see the currency as a threat to the nation’s banking system.

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bank of israel, CBDC, Central Bank, competition, consultations, Crypto, Cryptocurrencies, Cryptocurrency, Digital Currency, digital shekel, israel, Israeli, paper, Payments, payments market, Privacy, public consultations, respondents, Responses, Survey

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Lubomir Tassev

Lubomir Tassev is a journalist from tech-savvy Eastern Europe who likes Hitchens’s quote: “Being a writer is what I am, rather than what I do.” Besides crypto, blockchain and fintech, international politics and economics are two other sources of inspiration.

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Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

bank of israel

Bank Of Israel: Adoption Of CBDC Will Not Materially Affect The Banking System

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Bank Of Israel: Adoption Of CBDC Will Not Materially Affect The Banking System

Israel’s central bank says the public’s adoption of the digital shekel is not expected “to materially affect the banking system.” The bank, however, warns that any issuance of such digital currency will likely result in a decline of the volume of the public’s deposits.

Increase in the Banking System’s Interest Expenses

Israel’s central bank, the Bank of Israel (BOI), has said its analysis of the proposed digital shekel’s possible impact on banking stability showed that the expected effect is not as significant as previously thought.

However, the bank’s analysis notes “the decline in the volume of the public’s deposits” held in banks following the issuance of digital shekel, would nonetheless lead to “some increase in the banking system’s interest expenses.” The same might also lead to an erosion of the banking system’s net profit, the BOI warned.

While the central bank said it has not yet made a decision to issue the central bank digital currency (CBDC), in its recently released statement, the BOI revealed it “is building an action plan for the potential issuance” of such a digital currency.

The statement also makes reference to a paper that was published by the BOI’s steering committee. In that paper, the committee examined the bank’s motivations for issuing the CBDC — also known as SHAKED — as well as the ramifications of such a digital currency on financial intermediation.

Erosion of Banks’ Liquidity Ratios

Meanwhile, the BOI statement also discusses some of the key findings from the steering committee’s May 2021 paper. The BOI statement notes:

Transferring a certain volume of money from the public’s deposits to SHAKED would have various effects on the balance sheets of the banking system and of the Bank of Israel. The banking system’s balance sheet would contract due to the decline in the ‘Public’s deposits’ item on the liabilities side and in the ‘Deposits at the Bank of Israel’ on the assets side.

The BOI adds that in the event the banking system attempts to maintain the credit portfolio to the public at levels prior to the CBDC launch, that development would “erode banks’ liquidity ratios to a certain extent.”

Besides looking at the potential impact that the CBDC might have on the banking system and the economy, the BOI said it will also “examine other issues that arise as part of the research and preparation toward a potential issuance of a digital shekel in the future.”

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The central bank concludes its statement by reiterating that it has not made a decision to issue the digital shekel just yet.

What are your thoughts on this story? Tell us what you think in the comments section below.

Terence Zimwara

Terence Zimwara is a Zimbabwe award-winning journalist, author and writer. He has written extensively about the economic troubles of some African countries as well as how digital currencies can provide Africans with an escape route.

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Image Credits: Shutterstock, Pixabay, Wiki Commons, Roman Yanushevsky

Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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