The Bank of Israel released a preliminary design proposal for a digital shekel (DS), Israel’s potential central bank digital currency (CBDC), despite no solid intent as yet for an official launch.
On March 3, the Bank of Israel’s Steering Committee issued an initial design for an in-house CBDC — outlining its supporting ecosystem, functionality, technical design, regulatory considerations and next steps.
The central bank’s committee had previously identified six possible motivations for issuing a digital shekel, which included creating an alternative payment system and infrastructure, lowering costs, improving privacy and supporting the government’s fight against the “black economy,” among others.
The digital shekel and other types of money in the economy. Source: Bank of Israel
In the latest report, it highlighted that CBDCs can benefit the general public:
“The DS is expected to offer a wide range of benefits to all segments of the population. It will be available to the entire public, including children, foreigners, all types of businesses, public institutions, and financial entities.”
Involving participation of private firms
According to the current plan, the Bank of Israel will be the sole issuer of the CBDC, and private-sector participants will help with user onboarding, converting deposits and providing advanced financial services.
Key features of the digital shekel would also include offline functionality, interoperability with other payment systems and digital asset networks and instant settlements. The report added:
“The DS will be interoperable with other payment systems, allowing users to receive or pay in digital shekel even if the other party to the payment does not use the digital shekel.”
Related: Why Kyrgyzstan is betting on a gold-backed stablecoin in the digital currency race
Collecting feedback on CBDC design
As part of the process to examine and evaluate the necessary functionalities of a digital shekel, the Bank of Israel issued a “Digital Shekel Challenge.” The challenge encourages technologists and businesses to showcase various real-world use cases for an in-house CBDC.
The final decision — of whether to launch an Israeli CBDC — will be made after 2026, based on research, public feedback and regulatory considerations.
Israel will be collecting public feedback and suggestions on designing the CBDC until April 30, 2025. The central bank will also send requests for information to technology providers to gain CBDC implementation ideas.
Magazine: Elon Musk’s plan to run government on blockchain faces uphill battle
