The use of stablecoin is expanding rapidly throughout the biblically designated holy zone.
In a paper released on Monday, the Bank of Israel outlined the potential scenarios that would prompt a decision to issue a digital shekel.
Israel would surely create its own central bank digital currency (CBDC) if the United States or the European Union made a wise decision to do the same, as would the fall in the usage of cash. The digital equivalent of a nation’s fiat currency—money backed by the government—is a CBDC.
To perform the same tasks as a traditional currency, CBDCs use stablecoins, whose value is tied to a reference asset like fiat cash. According to the Bank of Israel’s 21-page research outlining the scenarios, only a small number of the world’s central banks have advanced to the point of issuance, even though 90% of them are considering CBDCs.
The Bank of Israel Steering Committee recognized Israel’s declining use of cash as a possible catalyst for CBDC growth. It was noted that although consumers still largely use cash to make purchases, this may alter as people get used to new payment options.
Stablecoin transactions have many benefits over more traditional payment systems, including speed, affordability, and security. They also meet a demand for an electronic currency alternative, as paper money is becoming less and less popular worldwide.
However, there are problems with CBDCs that need to be carefully considered and addressed, such as worries about monetary stability, privacy risks, and cybersecurity risks.
The bank stated that the issue decision in Israel is influenced by the success of CBDCs from other nations, such as the United States or the European Union. The Bank for International Settlements (BIS) and the central banks of Sweden, Norway, and Israel previously worked together to research the possibilities of stablecoin for cross-border retail and remittance transactions.
Israel seems to be following the US lead in terms of crypto legislation. The Israel Securities Authority (ISA), Israel’s securities regulator, earlier this year proposed legislation that would regulate digital assets similarly to stocks and bonds.
Ilan Tennenbaum, an analyst and seasoned trader, said: “The world situation right now is that some countries – for example, Australia, Brazil, Canada, China, India, and Japan – already have a CBDC project on some level.” The BOI will monitor how other nations respond to these challenges. A private-by-design CBDC blockchain technology was put to the test last year. It additionally participated in Project Icebreaker, which investigated the usefulness of CBDCs for cross-border money transfers.