The Bank of Israel has recently revealed its plans to potentially issue a digital shekel, named “SHAKED,” which would serve as a central bank digital currency (CBDC). The Bank’s Steering Committee on the Potential Issuance of a Digital Shekel presented various scenarios for the development and deployment of this digital currency on April 17th.
The potential issuance of a digital shekel has been a topic of discussion for the Bank of Israel for some time now. In 2017, the Bank established a team to research the feasibility of a digital currency and its potential impact on the country’s financial system. The Bank’s latest announcement marks a significant step forward in the development of a digital shekel.
The Bank of Israel’s Steering Committee outlined several potential use cases for the digital shekel. These include facilitating the transfer of funds between banks, enabling cross-border payments, and providing an alternative payment method for consumers. The digital shekel would also aim to improve financial inclusion by providing a means of payment for those who do not have access to traditional banking services.
One key advantage of a digital shekel is that it would allow for more efficient and cost-effective payment processing. Transactions could be settled almost instantly, without the need for intermediaries such as clearinghouses or payment processors. This would also reduce the risk of fraud and counterfeiting, as the digital nature of the currency would make it more difficult to replicate.
However, the Bank of Israel also acknowledged that there are several challenges that must be addressed before a digital shekel can be successfully deployed. These include ensuring the security and privacy of transactions, addressing the potential impact on monetary policy, and ensuring that the digital currency is accessible to all members of society.
Despite these challenges, the Bank of Israel remains optimistic about the potential benefits of a digital shekel. The Bank’s Governor, Amir Yaron, stated that “the Bank of Israel is advancing towards a digital economy, and the digital shekel is a central part of this process.”
The Bank of Israel’s announcement comes at a time when several other countries around the world are also exploring the possibility of issuing their own CBDCs. China, in particular, has been at the forefront of CBDC development, with its digital yuan already being trialed in several cities.
In conclusion, the Bank of Israel’s plans to potentially issue a digital shekel represent a significant step forward in the country’s move towards a digital economy. While there are several challenges that must be addressed, the potential benefits of a digital shekel are clear. It remains to be seen how the development and deployment of this digital currency will unfold, but it is clear that the Bank of Israel is committed to exploring the possibilities of a digital shekel.
