The Central Bank of Israel is considering the issuance of
a digital shekel to enhance the country’s payment system. However, the decision
to launch the financial instrument remains a topic of debate, echoing similar
discussions in advanced economies globally.
The Bank of Israel’s
Governor, Amir Yaron, shared these insights during a recent conference on
digital currencies, highlighting the nation’s strides towards modernizing
financial systems. Since November 2021, the Bank of Israel has been actively
researching and preparing for the potential introduction of a digital shekel,
Israel’s central bank
has collaborated with its Hong Kong counterpart and the Bank for International
Settlements on a project dubbed Sela. This initiative has successfully
demonstrated the feasibility of a retail CBDC, combining accessibility,
competition, and cybersecurity measures. Israel initially considered launching
a CBDC in 2017.
Governor Yaron pointed
out that the rapid digitization of the economy makes working on a CBDC a
logical step forward. He emphasized that if Israel decides to proceed, it will
prioritize privacy in digital payments, offering a higher level of privacy
compared to conventional digital means.
Besides that, the
Israeli Ministry of Finance has taken a proactive approach to regulating
Decentralized Autonomous Organizations (DAOs). According to a report by Finance
Magnates, the Israeli
Ministry of Finance announced in July the formation of a cross-agency team
tasked with formulating
regulations for DAOs.
Global CBDC Race Heats Up
Meanwhile, the race for
the launch of CBDCs continues to gain momentum globally. Last month, Russia embarked
on a pilot project for
the digital ruble that was scheduled to kick off on August 15th. Collaborating
with 13 banks and select clients, the country’s central bank is testing the
digital currency’s viability in real-world scenarios.
Russia’s pivot toward
digital currencies, particularly the digital ruble, is a strategic response to
economic sanctions imposed by the US and its Western allies in the wake of the
country’s invasion of Ukraine. These sanctions have disrupted traditional
financial services, prompting Russia to explore alternative avenues to maintain
its financial systems.
Elsewhere, the Bank of
France is setting the stage for collaboration with private companies to
introduce a central bank digital currency (CBDC) for both institutional and
retail clients. In July, the central bank released a set
of policy recommendations aimed
at facilitating the launch of the CBDC within the country. This move comes as
the Bank of France has been actively engaged in experiments related to
wholesale CBDCs since 2020.
This article was written by Jared Kirui at www.financemagnates.com.
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