The Bank of Israel has introduced a potential design for a central bank digital currency (CBDC), though officials emphasized that no final decision has been made on its issuance.
In a paper published on March 4, the central bank described the proposed digital shekel (DS) as a “multipurpose CBDC” that would cater to both retail and wholesale users.
Digital Shekel
If implemented, the CBDC would serve as an alternative to cash for households and businesses while also enhancing settlement systems used by financial institutions.
According to the central bank:
“The DS will be a multipurpose digital currency that will address both the retail needs of end users such as households and businesses as well as the wholesale needs of financial entities.”
The bank highlighted that the digital shekel would function as a cash equivalent for consumers while integrating programmable and composable features into the existing financial infrastructure. These advancements could improve efficiency and introduce new financial tools for institutions.
Despite releasing a potential framework, the central bank emphasized that discussions remain in the exploratory phase. It added that the design should be considered preliminary.
The Bank of Israel first began exploring a digital shekel in 2017, forming a dedicated research team to assess its feasibility. A 2018 report ultimately recommended against immediate issuance, citing concerns over technological readiness and financial stability.
However, with the global rise of digital currencies, the bank renewed its efforts in 2021, launching a public consultation process and conducting technical trials. In 2022, it tested smart contracts and interoperability features, emphasizing security and efficiency in digital payments.
Global CBDC trend
The Bank of Israel’s move aligns with broader global efforts to explore CBDCs.
Proponents argue that CBDCs could enhance financial inclusion, improve cross-border payments, and modernize monetary policy tools. However, critics warn of privacy concerns and the potential for increased state surveillance over financial transactions.
The People’s Bank of China has been at the forefront, with its digital yuan already undergoing extensive pilot programs in multiple cities.
The European Central Bank is also advancing its digital euro initiative, targeting a potential rollout later this decade, while the Bank of England is in the design phase of its digital pound. The Bank for International Settlements is also pushing for central banks to develop in-house CBDCs.
Meanwhile, the US has adopted an anti-CBDC stance. Both regulators and lawmakers have openly opposed the idea of the Federal Reserve developing a CBDC due to concerns around financial privacy.
The Bank of Israel’s announcement places it among the many central banks assessing the feasibility of CBDCs. While the digital shekel remains conceptual, its development will be closely watched as global financial systems continue their transition toward digitalization.
The post Israel joins global CBDC discussions with digital shekel proposal appeared first on CryptoSlate.
