According to Cointelegraph, the Bank of Israel has introduced a preliminary design proposal for the digital Shekel (DS), a potential central bank digital currency (CBDC) for Israel. Despite the absence of a definitive plan for its official launch, the proposal outlines the supporting ecosystem, functionality, technical design, regulatory considerations, and future steps for the digital currency.
The central bank's Steering Committee has previously identified six potential motivations for issuing a digital Shekel. These include creating an alternative payment system and infrastructure, reducing costs, enhancing privacy, and aiding the government's efforts against the "black economy." The report emphasizes that the digital Shekel could offer significant benefits to the general public, making it accessible to all, including children, foreigners, businesses, public institutions, and financial entities.
The current plan envisions the Bank of Israel as the sole issuer of the CBDC, with private-sector participants assisting in user onboarding, deposit conversion, and providing advanced financial services. Key features of the digital Shekel include offline functionality, interoperability with other payment systems and digital asset networks, and instant settlements. The report highlights that the DS will be compatible with other payment systems, enabling users to transact in digital Shekel even if the counterparty does not use it.
To further explore and evaluate the necessary functionalities of a digital Shekel, the Bank of Israel has launched a "Digital Shekel Challenge." This initiative invites technologists and businesses to demonstrate various real-world use cases for an in-house CBDC. The final decision on whether to launch an Israeli CBDC will be made after 2026, based on research, public feedback, and regulatory considerations.
Israel is actively seeking public feedback and suggestions on the design of the CBDC until April 30, 2025. Additionally, the central bank plans to issue Requests for Information (RFIs) to technology providers to gather ideas for CBDC implementation.
Alex
