• The Bank of Israel detailed the potential scenarios that could lead to the issuance of a central bank digital currency (CBDC) – digital shekel (SHAKED).
• The Bank stated it was preparing an action plan for the potential issuance of SHAKED, even though it had not yet decided on whether to issue the currency.
• If developed countries like the U.S. or EU were to issue their own CBDCs, this could influence Israel’s decision to do so as well.
The Potential Issuance of a Digital Shekel
The Bank of Israel Steering Committee recently released a statement detailing the possible scenarios that could lead to issuing a central bank digital currency (CBDC), also known as ‚digital shekel‘ (SHAKED). While no decisions have been made yet, they are currently preparing an action plan to potentially issue SHAKED if certain conditions are met.
Other Countries’ Influence on Issuance
One factor influencing Israel’s decision is whether or not other developed countries such as the United States and European Union choose to issue their own CBDCs. Financial authorities in both regions have increasingly spoken about these digital currencies, and European Central Bank President Christine Lagarde has warned that Central Banks could lose relevance if they fail to adopt them.
Declining Use Of Cash
Another potential reason for issuing SHAKED is if there is a decline in the legitimate use of cash and its acceptance by merchants and public entities in Israel. This would encourage people to transition towards electronic payments and may result in more efficient payment systems across the country. Additionally, it would reduce costs associated with physical currency handling among banks and other financial institutions.
Benefits & Risks of CBDCs
Before issuing SHAKED, The Bank of Israel needs consider both risks and benefits associated with CBDCs: while they can make payments more efficient, secure and accessible, there are also concerns over privacy issues that may arise due to increased surveillance capabilities when using digital currencies. Another risk includes cyber security threats which must be taken into consideration before any official decision can be made on whether or not to issue SHAKED.
Although The Bank has yet to decide on whether it will issue a digital shekel or not, their statement shows they are taking steps towards considering this option should certain conditions be met by other developed countries like the US or EU who may opt for their own CBDCs in future months or years ahead.