Israel Central Bank Says NO to State-Owned Cryptocurrency
Israel’s central bank - Bank of Israel - has published a 40 page document on the work done by its interdepartmental team to determine the possibility of having a central bank digital currency and how it could be brought into the country’s financial system.
Having researched the global scenario for CBDCs and every aspect surrounding it, the central bank of Israel concluded not to have their own CBDC as of now. Hence the possibility of e-Shekel arriving any time soon looks to be quite slim.
Karnit Flug, Governor of the Bank of Israel, and his team conducted a thorough research into several prospects for having a CBDC. Although the report concludes on not having a CBDC for now, it says that the central bank will continue to monitor global developments in this space.
There are a number of global banks, mostly the central banks of the advanced economies who have been testing the possibility of CBDC in the past. Just a few days back, the Swedish government published a report which notes that the European nation can possibly launch the digital version of fiat Krona going ahead. Riksbank, Sweden’s central bank has also outline the benefits of e-krona in that report.
The Bank of Israel says that the advent of digitization through the crypto token economy is not a threat to them as the “issue is not relevant to Israel at this time.” Below is the short excerpt from the report.
“The document presents the main objectives that issuing CBDC may have. One of those objectives is maintaining the public’s access to the central bank’s liability, in the event that the use of cash declines significantly as is happening in Sweden. However, this issue is not relevant to Israel at this time. Another motivation for issuing an e-shekel may be to support the payments system (including improved redundancy) and make payments more efficient. Under certain specifications, and particularly if it bears interest, the e-shekel can be an additional monetary tool, but that is not a main objective of issuing it.”
The Bank of Israel also notes that there is no uniform specification for CBDCs including its accessibility, the extent of anonymity, the method of issuance, and other things. The central bank studies all the risks, advantage and disadvantages with the issuance of CBDCs. The bank found several technological difficulties and risks of issuing CBDCs which can have a detrimental impact on the country’s financial system.
However, the central bank also notes some benefits like a big push to Israel’s fintech growth and tapping the unreported economy.