By The Bank of Israel recently released their results of a research study which they conducted late last year in order to determine the feasibility of the creation a digital currency which would be equal in value to that of the shekel.
The aptly named “Digital Shekel” which was the proposed stablecoin was found to be “unsuitable” to Israel’s needs in a variety of areas of use and the report subsequently recommended that Israel’s central bank should not issue the crypto in the near future.
But Why “Can” The Digital Shekel?
Back in December 2017, it was reported that a joint team comprised of members from the Israeli Finance Ministry & the Bank of Israel convened under the supervision of outgoing Bol governor Dr Karnit Flug in order to glean the pros and cons of the issuing of the Israeli Central Bank digital Currency or CBDC. Pros given at the time included the provision of faster, almost-instant payments as well as the reduction of the unreported economy which ultimately would result in the rise of tax receipts.
An announcement made today pertaining to the new report however, the Bol made it clear that despite the possibility of issuing the CBDC has not been permanently canned, the research itself clearly recommends that their decision remains in place for the time being at least:
“The team does not recommend that the Bank of Israel issue digital currency in the near future. It is necessary to continue examining the field and to follow developments around the world before there are proper grounds for a decision to recommend issuing digital currency.” – an excerpt from the announcement.
The Bol went on to state that despite a growing number of banks around the world looking into issuing their own CBDC’s as well as implementing DLT in their payment gateways, no central bank in any “advanced” country/economy has actually issued a CBDC for general use thus far. His argument is in fact backed up by the fact that Venezuela, a third-world emerging economy is the only country on the planet so far, to successfully implement a country-wide CBDC program which has actually suffered a series of very publicised controversies & failures during the last few months.
Furthermore, the Bol also stated that while CBDC’s could be useful in order for the maintenance of public access to the central bank’s liability in an event of a substantial reduction in cash usage as is the case, currently in Sweden, this particular problem does not currently apply to the state of Israel’s economy at the moment. Of course, another possible use of the Digital Shekel is the use of it in supporting existing payments systems in order to make them more efficient, and this has been acknowledged as an additional monetary tool, but the Bol and others in power do not see this as a core objective for the issuing of a CBDC.
Lastly, the report also denoted that an introduction of CBDC’s into the economy also brings along with it, it’s very own list of risks & difficulties which could very well have a potentially drastic impact on the Israeli financial system as well as the Bank of Israel and lastly, the country’s payments system. Until such a time where all the risks are fully understood and mapped out, said the report, the team behind the research will continue with their studies around the potential impact of a Digital Shekel as well as follow any CBDC developments and discoveries from around the planet in an effort to possibly change their current status quo should it become applicable.
To read the full report in English just click here.
Let us know what your thoughts are on Israel’s decision to not go forward with their Digital Shekel by commenting below.
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