Reluctant of private companies taking over the digital payment systems in the country, Bank of Israel announced its action plan for the prospective issuance of “Digital Shekel’’ a Central Bank Digital Currency (CBDC).
According to a press release on April 17 2023, the Bank of Israel Steering Committee on the Potential Issuance of a Digital Shekel outlined the plan to issue a digital shekel “SHAKED.” While the decision has not been finalized yet, the central bank revealed potential reasons behind the issuance of a CBDC.
The Bank of Israel shared factors that would support a decision to issue a CBDC in the future. It includes CBDC issuances by other countries such as the U.S. and the European Union, declining cash transactions in Israel, stablecoin adoption, competition in the domestic payment system, and technological developments in payments.
It further noted that Increased adoption of stablecoins may “impair the payment system,” and that stablecoins not pegged to the shekel “might also harm the monetary transmission.”
“At this point, there are no signs of substantial adoption of stablecoins as means of payment in Israel. However, paying habits of the public might change rapidly, for instance in a scenario of issuance by a major private sector entity.”
Another potential driver of CBDC development is a decline in the use of cash in Israel, the committee said. While cash is still used in a significant portion of consumer transactions in the country, a change in the public’s payment habits may result in a shift away from using central bank fiat, according to the committee.
Israel seems to be shadowing the US on crypto regulation. Earlier this year, the nation’s securities regulator, the Israel Securities Authority (ISA), proposed laws that will classify crypto property as securities within the nation.