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Israel’s central bank speeds up digital currency preparations | The powerful 790 KFGO

By on May 11, 2021 0

By Steven Scheer

JERUSALEM (Reuters) – Israel’s central bank said on Tuesday it was once again considering issuing a digital shekel that would create a more efficient payments system.

The Bank of Israel began to consider the possibility of issuing a central bank digital currency (CBDC) at the end of 2017, but a year later, a team set up to investigate the matter recommended not to issue. a CBDC in the near future.

Now, the bank has said that due to rapid developments in the digital economy and with other central banks considering digital currencies, the Bank of Israel is “stepping up its research and preparing” for a potential issue of a digital shekel.

The Bank of Israel is seeking public comment on the matter until July and has set up a panel led by its deputy governor to study its feasibility and how a digital shekel would benefit the economy.

“Like many other central banks, the Bank of Israel has yet to decide whether it intends to issue a digital currency,” he said. He noted, however, that central banks in major economies have stepped up research on CBDCs as an alternative payment method and created new technology to keep pace with the digital economy.

The central bank, she added, is preparing a plan of action if “conditions develop in the future that would lead to an assessment by the Bank of Israel that the benefits of issuing a shekel digital outweigh the costs and potential risks ”.

The benefits of a digital shekel include reducing the use of cash in the fight against the “black economy”, creating an efficient and cheaper infrastructure for cross-border payments, allowing the use of one payment method. digital private sector and provide backup for the payment system in the event of an emergency outage, the central bank said.

If the Bank of Israel went ahead with its plan, it would implement it in two possible ways – by providing an app through which people could transfer funds from their bank accounts to the central bank, or by using intermediaries such as commercial banks, fintech companies, and global companies like Apple and Google.

Therefore, the central bank said, digital currencies could pose a risk to the banking system and affect the ability of banks to issue credit if people transfer funds from their accounts. The bank said it would investigate whether this risk was substantial and could ultimately lead to a cap on the amount people were allowed to transfer.

(Report by Steven Scheer, edited by Ed Osmond)