June 24, 2024
Israel Accelerates Digital Shekel CBDC Development
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Israel Accelerates Digital Shekel CBDC Development

Israel Fast-Tracks Development of Digital Shekel CBDC

Israel is speeding up the creation of its central bank digital currency (CBDC), the digital shekel, to improve its digital payments ecosystem. The Bank of Israel (BoI) has announced plans to work with various service providers to achieve this goal.

Digital Shekel Challenge: A Collaborative Effort

The BoI has initiated the “Digital Shekel Challenge,” drawing inspiration from the “Project Rosalind” by the Bank for International Settlements (BIS) and the Bank of England. This initiative aims to foster the creation of an advanced digital payments system focused on the digital shekel. The challenge involves a sandbox environment and a layer of application programming interfaces (APIs), allowing participants to build real-time CBDC payment systems for public use.

Shauli Rejwan, managing partner at Masterkey Venture Capital, explained that the challenge comprises three phases: application and presentations, access to the new network for selected projects, and a final presentation to judges. This initiative is seen as a potential bridge between the Web3 industry and government, despite not yet considering decentralized finance and permissionless solutions.

Engaging Diverse Sectors for Innovation

Israel has invited participants from the private, public, and academic sectors to join the experiment. The BoI has emphasized the importance of originality and innovation in the payments world, encouraging solutions that either enhance existing applications or introduce entirely new concepts. While CBDCs typically cater to universal use cases, Israel’s CBDC experiment allows for the development of niche solutions.

On April 16, BoI Deputy Governor Andrew Abir highlighted the economic benefits of CBDC competition with traditional banks. He assured that the digital shekel would be backed by the same trusted institution behind Israel’s cash, providing reassurance to the public. Abir also noted that the digital shekel could motivate banks to offer higher interest rates.

Public Support and Privacy Concerns

A public consultation report released on May 11 confirmed widespread support for the development of the digital shekel. Respondents supported continued research into the implications of CBDC on the payments market, financial stability, and legal and technological issues. However, there were unanimous concerns about potential privacy breaches associated with CBDC.

Paving the Way for Digital Payments

Israel’s efforts to develop the digital shekel mark a significant step towards modernizing its payments ecosystem. By involving various sectors in the Digital Shekel Challenge and addressing public concerns, the BoI aims to create a robust and innovative digital currency. The success of this initiative could set a precedent for other nations exploring CBDC payments, ultimately transforming the global financial landscape.

Disclosure Statement: Miami Crypto does not take any external funding, or support to bring crypto news to the readers. We do not have any conflicts of interest while writing news stories on Miami Crypto.

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