Bank of Israel Garners Support but Still Skeptical About Digital Shekel

Key Insights:

• Bank of Israel has continued research about launching a CBDC.
• The Bank stepped up research and development in November last year.
• Amid support for launching a CBDC, the Bank still hasn’t made any final decisions.

As global economies displayed rising interest in CBDCs over the last year, Israel’s Central Bank has also received positive support from citizens about the same. However, the finance institution’s position about issuing one is still unclear.

CBDCs for the rescue?

On Monday, Israel’s Central Bank said that it had garnered public support for its plans to issue a digital shekel possibly. They revealed that the citizens believe that launching a central bank digital currency (CBDC) would help the economy by supporting innovation in the payments system, reducing the amount of cash, and bolstering the fintech sector.

The Bank had increased its efforts of research and preparation for the possible issuance of a digital shekel in November last year. It stepped up research to create a more efficient payments system after first considering issuing a central bank digital currency in late 2017.

Furthermore, in March, the financial institutions said that a digital shekel was unlikely to erode the banking system’s business results significantly. The Bank finally called on the public to weigh the pros and cons of launching a CBDC.

On May 10, the Bank of Israel said that it had received 33 responses from various sectors, half from abroad, while around 17 replies came from the fintech sector.

Bank of Israel remains skeptical

Citizens of Israel believe that a CBDC could help the economy grow by supporting innovation in the payments system and reducing the amount of cash.

However, the Bank of Israel still remains unsure. As per recent reports, the Central Bank said,

“The Bank of Israel has still not made a final decision on whether it will issue a digital shekel.”

They further added:

“But all of the responses to the public consultation indicate support for continued research regarding the various implications on the payments market, financial and monetary stability, legal and technological issues, and more.”

Reportedly, a digital shekel would come at zero or low costs to business owners and consumers and be easy to use for all, including the elderly.