Israel's central bank floats possible digital shekel with new action plan

Published at: May 11, 2021

The Bank of Israel is accelerating its research for the potential issuance of a central bank digital currency, or CBDC. 

In a statement from the central bank on Tuesday, the Bank of Israel said it was preparing an action plan to explore the benefits of a digital shekel to the economy. Though the bank said it had not yet decided whether to issue a central bank digital currency, it added it would be prepared to do so should the benefits “outweigh the costs and potential risks.”

The central bank said it may consider issuing a CBDC if it could meet the needs of the future digital economy as well as provide more efficient cross-border payments. In addition, the Bank of Israel hopes to reduce the use of cash and ensure the public can make payments with “a certain level of privacy.”

Israel’s central bank has been exploring the introduction of a CBDC since 2017, when the governor set up an interdepartmental group to explore the issue. The following year, the team recommended against the Bank of Israel issuing a digital currency, saying: “No advanced economy has yet issued digital currency for broad use.”

However, the exploration and use of CBDCs have expanded significantly in the last three years, with countries like China piloting its digital yuan project in major cities across the country. In addition, the Bahamas became the first country to issue its own CBDC — the Sand Dollar — in October 2020.

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