Israel Launches Pilot for Digital Shekel

The Bank of Israel (BoI) has invited local and international service providers to participate in developing “innovative use cases” for the digital shekel.

As part of the Digital Shekel Challenge, participants will compete in areas such as split payments, microtransactions, additional storage options, and other financial services related to CBDC.

“During the process of studying and assessing the necessary functions of the digital shekel, BoI decided to launch an experiment inspired by Project Rosalind, implemented by the Innovation Hub of the BIS,” the press release states.

Contestants are selected based on several criteria. The Bank of Israel will evaluate the innovation of the development and its compatibility with the country’s economic needs.

It is also important to align with the planned characteristics of Israel’s CBDC:

• competitiveness;
• redundancy and resilience;
• cross-border capabilities;
• payment privacy;
• reduction of cash usage.

In the second stage of the competition, selected participants will receive “the necessary technological details and access to the digital shekel’s API level.”

Participants will independently develop their solutions. In the end, candidates must demonstrate a fully functional product, nearly ready for launch.

On April 16, BoI Deputy Chairman Andrew Abir stated that CBDC competition with banks is beneficial for the country’s economy. He believes the digital shekel project will gain public support.

“In many countries around the world, including Israel, private banks do not win public popularity contests. […] In our country, part of the anger directed at the banking system results from the need to increase competition in certain segments,” he noted.

Back in late 2017, Israeli authorities first floated the idea of issuing a digital shekel. The project was later put on hold. In May 2021, BoI presented a working paper outlining the model and benefits of CBDC for subsequent public consultations.

In April 2023, the local central bank outlined the conditions for launching the digital shekel.