The Bank of Israel has joined several other central banks to gradually prepare for the launch of a central bank digital currency (CBDC), which in its case would be the digital shekel. The monetary regulator announced on Tuesday that it is accelerating its preparations for the potential launch of digital fiat.
However, the central bank stressed that it has no confirmed plans to launch digital shekel.
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“It is important to emphasize: Similar to many other central banks, the Bank of Israel has not yet decided whether it intends to issue a digital currency,” the official announcement noted.
The regulator is only preparing an action plan, which will ensure its preparedness to launch a CBDC if the situation arrives. The primary focus of it would be to assess the benefits and risks of such a digital fiat, as its impact could be enormous on the existing monetary system.
“A digital shekel could generate various benefits for the Israeli economy, but issuing it also involves risks,” the central bank added.
Shaping the Efforts for a Digital Fiat Launch
The Bank of Israel started to examine the possibilities of digital currency as early as 2017. Now, the central bank is forming a steering committee, which will be led by the Bank of Israel’s Deputy Governor, to assess the potential of issuance of a digital shekel.
Further, the central bank released a draft model and is seeking comments on that to begin the discussions. However, it was very particular with the fact that the draft does not represent the currency’s characteristics.
Though many other major economies are working on CBDCs, China is the only one with definite plans to launch the digital yuan. The People’s Bank of China has been running CBDC pilots for almost a year now and has partnered with major private companies for a smooth launch. However, the date is not confirmed yet.
Last month, the United Kingdom formed a task force to assess the benefits and coordinate the work on a potential CBDC.