Although no formal decision has been taken, the Bank of Israel says it is creating an action plan for the future launch of a central bank digital currency (CBDC). On April 17, the Bank of Israel’s Steering Committee on the Potential Issuance of a Digital Shekel described potential scenarios for the creation and deployment of a CBDC, dubbed “SHAKED.”
It presented numerous possibilities that may result in the creation of a digital shekel, one of which was increasing stablecoin activity. Increased acceptance of stablecoins may “harm the payment system,” it said, before adding that stablecoins that are not tied to the shekel “may also harm monetary transmission.” “At this time, there is no evidence of widespread adoption of stablecoins as a means of payment in Israel.” However, the public’s payment patterns may alter quickly, as in the case of an issue by a big private sector organization.”
According to the Committee, another possible driver of CBDC expansion is a fall in the use of currency in Israel. It stated that while cash is still utilized in a substantial share of consumer transactions in the country, a movement in public payment patterns might result in a shift away from utilizing central bank currency.
Because the Bank of Israel does not want this situation or private companies regulating payments, a CBDC might be the answer. It also stated that the issuing of a CBDC will be considered in order to “support competition in the payments system and the financial system in the digital era.” It added that if the United States or the European Union issue a CBDC, it will affect Israel’s decision to deploy one.
The Bank of Israel Steering Committee determined that it will continue to monitor the situation in order to advance the digital shekel. In terms of cryptocurrency legislation, Israel looks to be trailing the United States. The country’s securities regulator, the Israel Securities Authority (ISA), proposed legislation earlier this year that would categorize crypto assets as securities in the country. Executives in the sector have voiced alarm, warning that it might “kill the industry.”
