Bank of Israel Proposes Design for Central Bank Digital Currency
The Bank of Israel has unveiled a potential design for a central bank digital currency (CBDC), which may be implemented in the future depending on forthcoming decisions. In a detailed paper released on Tuesday, the central bank described the envisioned digital shekel (DS) as a “multipurpose CBDC.” This innovative currency is intended to cater to both retail and wholesale markets.
The paper states, “The DS will be a multipurpose digital currency that will address both the retail needs of end users such as households and businesses as well as the wholesale needs of financial entities.” This initiative aims to provide a digital counterpart to cash, enhancing the current financial ecosystem.
Moreover, the Bank of Israel plans to modernize its existing settlement system utilized by financial institutions, incorporating “smart” features like composability and programmability. These advancements are expected to enhance the efficiency and functionality of financial transactions.
It is important to note that, as of now, no definitive decision has been made regarding the issuance of a CBDC. Consequently, the design outlined in the paper should be viewed as a preliminary concept rather than a final blueprint.
The exploration of CBDCs is a trend observed among central banks across nearly all developed economies, which have been examining this possibility for several years. Advocates for CBDCs argue that they can promote financial inclusion and safeguard the future of fiat currencies in an era of declining cash usage. However, critics express concerns that these digital currencies could serve as a Trojan horse for increasing state control over the monetary system.
