The Bank of Israel Steering Committee on the Potential Issuance of a Digital Shekel has outlined potential scenarios for deciding to issue a digital shekel, despite the fact that a decision has not yet been made as to whether the Bank intends to do so. The Steering Committee’s recommendation discusses the conditions that would enable or support a decision to issue a Bank of Israel digital currency and indicates a number of variables that must be considered. According to the report, there are a number of variables and their potential impact on the issuance of a digital shekel that are being considered.
The Committee believes that a decision to issue a CBDC by the US or the European Union, or by a significant number of other developed economies, would be an important factor in Israel’s issuance decision. The probability of such a development in the next few years is significant.
The decline in the legitimate use of cash and its acceptance in transactions in Israel is another important factor that needs to be considered. Moreover, significant penetration of stablecoins or other private means of payment that would be broadly used might impair the payment system. A stablecoin that isn’t pegged to the shekel might also harm the monetary transmission.
The extent of competition in the domestic payment system is also a key consideration. Continued concentration in some segments of the domestic payments system due to the dominance of a small number of participants could impact the ability of the digital shekel to gain traction.
Technological developments in the payments system may also impact the decision to issue a digital shekel. In the future, there may be significant justification for issuing a digital shekel, as it would be able to serve as an efficient and secure platform for advanced technological use cases.
The Bank of Israel Steering Committee on the Potential Issuance of a Digital Shekel has outlined potential scenarios for deciding to issue a digital shekel. The variables that must be considered include a decision to issue a CBDC by other developed economies, decline in cash usage, penetration of stablecoins or other private means of payment, competition in the domestic payment system, and technological developments. The Bank of Israel must be prepared to advance the issuance of a digital shekel if the variables listed above support it. The Steering Committee will therefore monitor the developments in these aspects periodically.
