Bank of Israel (BOI) has postponed the launch of
the digital shekel until the European Central Bank (ECB) unveils its digital
euro, Reuters reported. BOI will wait for major Western central banks to take
the first step in adopting central bank digital currencies (CBDCs).
Digital Shekel Debut
BOI’s Deputy Governor Andrew Abir told the media
publication: “We are all waiting for the first western central bank to
pull the trigger, which is almost certainly going to be the ECB. And then you
may see a rush of countries going forward with it.”
As of March, 134 countries, encompassing 98% of the
global economy, are exploring digital versions of their currencies. China leads
with advanced pilot programs, while the US Federal Reserve lags behind. The
Bank of Israel initiated its exploration into CBDCs in 2017, aiming to enhance
its payments system.
The BOI’s interest in a digital shekel intensified in
November 2020. Collaborating with central banks from Hong Kong, Sweden, Norway,
and the Bank for International Settlements. BOI has been testing its digital currency in an initiative termed the “Digital Shekel
Challenge,” which invites fintech and traditional financial companies to
showcase potential use cases.
Despite these efforts, the BOI is uncertain about the
eventual launch of a digital shekel. The current experiment serves as an
“action plan” to be implemented when deemed necessary and
appropriate.
The ECB shares similar hesitations, with the potential
introduction of a digital euro still uncertain. Europe’s dependence on
cross-border payment services from US giants like Visa and Mastercard adds to
the complexity.
Public Adoption Uncertainty
Abir highlighted the challenge of public adoption,
stating that the concern is whether the public will adopt a digital currency.
The BOI is conducting a behavioral study to understand the public willingness
to embrace a digital shekel.
Abir pointed out the gap between theoretical studies
and practical usage. He said that some studies are pushing people to use digital currency. However, he maintains that there should be
a good set of use cases.
As the BOI waits for the ECB’s move, the global
financial community remains keenly interested in how digital currencies will
reshape economies and payment systems. The success of the digital euro could
pave the way for Israel’s digital shekel and potentially revolutionize global
financial transactions.
This article was written by Jared Kirui at www.financemagnates.com.
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