Bank of Israel outlines conditions for launching the digital shekel

The Bank of Israel outlined CBDC conditions, with no final decision yet.

The Bank of Israel перечислили the main conditions for creating the national digital currency SHAKED. However the regulator has not yet made a final decision on launching CBDC.

One of the important factors cited is a decision by the United States, the EU, or a significant number of other countries to issue a national digital currency. Such a development, the Bank of Israel regards as highly likely in the coming years.

Another condition for launching CBDC is the decline in cash usage in the country. According to the central bank, this could occur as payment apps and electronic means gain traction more broadly.

“A significant deployment of stablecoins or other private payment instruments that will be widely used could undermine the payment system. A stablecoin not tied to the shekel could also harm the money flow,” the Bank of Israel said.

The regulator, however, does not yet see signs of substantial adoption of ‘stablecoins’ as a means of settlement in the country. But the Bank of Israel allows for a rapid shift in payment habits in society.

“The Bank of Israel should be prepared to accelerate the issue of the digital shekel if the factors listed above confirm this. Therefore, the Steering Committee will monitor developments in the aforementioned aspects,” the ministry added.

Back in late 2017, Israeli authorities first floated the idea of issuing the digital shekel. The project was later frozen.

In May 2021, the Bank of Israel presented a working document outlining the CBDC model and its advantages for subsequent public consultations.

In January 2022, the regulator reported on progress in studying questions related to the benefits and risks of launching the digital shekel.