Bank of Israel Studies Potential of Digital Shekel

Israeli policymakers have broadened the scope of their research into launching a central bank digital currency (CBDC) as the Bank of Israel scrambles to avoid falling behind other countries.

As Bloomberg News reported Thursday (Jan. 13), the bank has begun talking about the risks and benefits of a CBDC with various stakeholders, according to Yoav Soffer, head of the bank’s digital shekel project.

However, the launch of a CBDC is theoretical for now, as questions about things like the cost of the token and its impact on the banking system remains unanswered. The bank has conducted experiments using Ethereum and is planning more studies to gauge the viability of different kinds of digital money, Soffer said.

“Right now, we are increasing the resources devoted to the digital shekel project, both in terms of finances and people,” he told Bloomberg. “A digital shekel has great potential to increase competition and innovation within the payment industry.”

Read more: Official: Israel Held A Test Run For A Digital Shekel

Last year, the bank’s Deputy Governor Andrew Abir said during a panel discussion that the bank had conducted a cryptocurrency pilot, but said a CBDC in Israel was far from certain. However, the bank has ramped up its efforts “in view of the rapid developments in the digital economy and in payments, and in view of the major central banks’ work on the issue,” Abir added.

As PYMNTS reported before, many of the world’s biggest economies are actively exploring a centralized digital currency, although it’s been a handful of smaller nations — the Bahamas and the Eastern Caribbean Central Bank among them — who were first out the gate with a CBDC.

Read more: Visa, Swiss Central Bank Efforts Latest Examples of 2022 CBDC Push

The Swiss National Bank reported Thursday (Jan. 13) it had conducted a successful test of a digital currency used in wholesale transactions, while the Bank of Mexico says it wants its own CBDC circulating in the next two years.

Meanwhile, the People’s Bank of China could become the first large world economy to issue a digital version of its yuan. WeChat, one of the nation’s most popular messaging app, announcing it will begin accepting digital yuan payments through its digital wallet.

The U.S., meanwhile, seems to be lagging in this race, although a report is due from the Federal Reserve on the feasibility of a CBDC is due in the coming weeks.