Digital Shekel Won’t Disrupt Israel, Central Bank Says

Israel’s central bank says that a national digital currency is unlikely to harm the country’s banking system.

As Reuters reported Wednesday (March 2), this announcement moves the Bank of Israel a step closer to potentially issuing a central bank digital currency (CBDC).

In an analysis published on Wednesday, the bank said a digital shekel — or “shaked” for its Hebrew acronym — should not impact the banking system too much should the country issue it as an alternative to cash.

“However, any potential transition of some of the public’s deposits to the shaked may have a material impact on: (1) the structure and quality of the banking system’s sources; (2) the banking system’s financing costs; (3) the volume and price of banking credit to the public; and more,” the report from the bank said.

The report says the CBDC would also be likely to influence the Bank of Israel’s balance sheet, while banks would need to take measures to sustain liquidity levels.

According to Reuters the Bank of Israel has stressed that — like other central banks — it has not yet made a decision about issuing a digital currency.

Read more: Bank of Israel Studies Potential of Digital Shekel

Earlier this year, Israeli policymakers announced they’d expanded the scope of their research into a possible CDBC launch as the Bank of Israel worked to make sure it wasn’t falling behind other nations and their digital coin projects.

Last year, the bank’s Deputy Governor Andrew Abir said the bank had carried out a cryptocurrency pilot, but said a CBDC in Israel was far from certain. But he noted the bank has stepped 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.”

As PYMNTS has reported, many of the world’s biggest economies have been actively exploring the launch of a centralized digital currency, although a handful of smaller nations — such as the Bahamas and the Eastern Caribbean Central Bank — were first out the gate with a CBDC.