The Bank of Israel recently published a preliminary project for the introduction of a digital shekel, also known as CBCD (Central Bank Digital Currency).
This project outlines a complex framework that includes the support ecosystem, technical design, and regulatory considerations. Let’s look together at the details of this initiative that could revolutionize the Israeli financial system.
Summary
CBCD: the new project of Israel
On March 3, the Steering Committee of the Bank of Israel released a document that explores in detail the potential of an internal CBDC.
This document not only describes the motivations behind the introduction of the digital shekel, but also outlines its technical characteristics and the next steps in the development process.
The central bank’s Committee has identified six main reasons for issuing a digital shekel.
Among these, the creation of an alternative payment system, the reduction of costs, the improvement of privacy, and the support in the fight against the underground economy. These objectives underline the importance of a more transparent and efficient financial system.
According to the report, CBDCs can offer numerous benefits to the public. The digital shekel should be accessible to everyone, including children, foreigners, businesses, public institutions, and financial entities.
This inclusivity aims to ensure that all segments of the population can benefit from digital innovation.
“`htmlTechnical characteristics and interoperability
“`The Bank of Israel will be the sole issuer of the CBDC, while private sector participants will play a fundamental role in user onboarding and the provision of advanced financial services. The main features of the digital shekel will include:
- – Offline functionality: Will allow transactions even in the absence of an internet connection.
- – Interoperabilità: It will be compatible with other payment systems, allowing transactions even with counterparts that do not use the digital shekel.
- – Instant settlements: It will allow for rapid and secure transaction settlements.
As part of the examination process, the Bank of Israel has launched the Digital Shekel Challenge. This initiative invites technologists and businesses to propose real use cases for the digital shekel, stimulating innovation and the adoption of new technologies.
Potential Impact on the Financial Market
The final decision on the introduction of an Israeli CBDC will be made after 2026. Until then, the Bank of Israel will gather public feedback and suggestions on the design of the CBDC.
Furthermore, it will send requests for information to technology providers to explore additional implementation ideas.
The creation of a digital shekel could transform the Israeli financial landscape. With a more efficient and secure payment system, operational costs could be reduced and financial transparency improved.
However, the adoption of a CBDC also involves challenges, such as the protection of privacy and the management of risks related to cybersecurity.
In summary, the project of the Bank of Israel for a digital shekel represents a significant step towards the innovation of the national financial system. It remains to be seen how this initiative will develop and what impact it will have on the Israeli and global economy.
With the collection of feedback and collaboration between public and private sectors, Israel is preparing to explore new frontiers in the world of digital currencies.
