Bank of Israel Monitors the Widespread Adoption of Stable Currency Prior to Issuing Digital Shekel

According to reports, the Bank of Israel is monitoring various situations, including the widespread adoption of the stable currency, which the Bank of Israel has stated may affect its decision to issue the digital shekel (SHAKED). The Bank of Israel made it clear in a report that regulatory authorities have not yet made a decision on the issuance of the Central Bank Digital Currency (CBDC). This 21 page document outlines various situations, pointing out that although 90% of the world’s central banks are studying CBDCs, only a few banks have advanced to the point of issuance.

Bank of Israel: No decision has been made on the issuance of CBDC

With the rise of cryptocurrencies and the popularity of decentralized finance platforms, the world is witnessing a revolution in the way financial transactions are conducted. Recently, the Bank of Israel has been monitoring various situations, including the widespread adoption of the stable currency, which the Bank of Israel has stated may affect its decision to issue the digital shekel (SHAKED). This article takes an in-depth look at the Bank of Israel’s view on issuing the Central Bank Digital Currency (CBDC), how it plans to oversee its development, and the challenges the bank is set to face.

Overview of the Bank of Israel’s View on Digital Shekel

The Bank of Israel has been working on digital currencies since 2017. The Bank expects to have a fully developed CBDC by 2025 and aims to become one of the world leaders in this field. The Bank has expressed its determination to issue a CBDC in the coming years, while emphasizing the need to conduct thorough research and analysis before making a final decision. The Bank’s decision on whether to issue a digital shekel will be influenced by several factors, including but not limited to, technological advancements, regulatory frameworks, and the widespread adoption of stable currencies.

Bank of Israel’s Regulatory Framework

The Bank of Israel published a 21-page report on the digital shekel in July 2021 outlining the regulatory framework of CBDCs in Israel. The report highlights several key findings on the regulation of CBDCs, including that the issuance of a CBDC poses several financial risks that need to be managed effectively, such as risks associated with the stability of the financial systems, money laundering, and cybersecurity.
The report also pointed out that there are encouraging signs that the issuance of a CBDC in Israel would benefit the economy, including providing financial inclusion to those who are currently underbanked or unbanked. Furthermore, the report acknowledges that the CBDC would ease the logistical challenges, including the need to transport cash and the high costs associated with it.

Widespread Adoption of Stable Currency

The Bank of Israel is keeping a close eye on the adoption rate of stable currencies and how that may affect the decision to issue the digital shekel. According to the Bank, stable currencies represent a growing trend in the cryptocurrency ecosystem and some have the potential to become a major player in the cryptocurrency market. The Bank is currently studying this phenomenon to determine its potential impact on the digital shekel.

Challenges Facing the Bank of Israel

The Bank of Israel faces several challenges in the development and issuance of the digital shekel. Among these challenges are the need for sustained and continuous research and development, the establishment of regulatory frameworks, and coordination with other financial institutions.
Furthermore, the Bank must also ensure accessibility and security for users of the digital shekel. To achieve this, the Bank must have an effective digital payment system that can handle high volumes of transactions and ensure that the digital shekel remains free from hacking attempts, identity theft, and other cybersecurity threats.

Conclusion

The Bank of Israel’s intention to develop and issue the digital shekel illustrates its commitment to staying at the forefront of innovation and adopting new technologies in the field of finance. While there are several challenges that the Bank must overcome before the issuance of the digital shekel, the benefits that the CBDC promises to bring to the economy justifies the effort.

FAQs

1. What is a stable currency, and how does it differ from other cryptocurrencies?
A stable currency is a type of cryptocurrency whose value is pegged to a stable asset or basket of assets, such as fiat currency or gold. Its value remains more fixed than traditional cryptocurrencies, which can experience significant fluctuations in value.
2. What are the financial risks associated with the digital shekel?
The risks associated with the digital shekel include risks to the stability of financial systems, money laundering, and cybersecurity.
3. When is the Bank of Israel expected to issue the digital shekel?
The Bank of Israel has expressed its desire to issue the digital shekel in the coming years, but has acknowledged the need for thorough research and analysis before making a final decision.