The Bank of Israel has reported progress on the development of an Israeli CBDC, but internationally the wider landscape remains fragmented from nation-to-nation.
Named the digital shekel (DS), the CBDC has progressed past ‘the completion of a high-level design’, Israel’s central bank detailed this week, though it has still not made up its mind on whether to fully launch one or not. The bank has mapped out a series of use cases and policy proposals around the project.
The bank envisions the CBDC functioning as a universal means of payment in a similar manner to cash and being made available to the entire Israeli public including children, overseas nationals and tourists, as well as all types of businesses and institutions.
Basic uses for private transactions will be free but businesses will have to pay a cost – though the central bank asserts that these costs will be lower than for existing digital payments.
Yoav Soffer, Digital Shekel Project Manager, said: “The Bank of Israel has not yet decided whether to issue a digital shekel, but it is important for us to prepare, and deepen the knowledge and understanding together with the ecosystem regarding each of the possible components of the digital shekel system.”
Under the bank’s proposals, the digital shekel will follow a two-tier model with private sector companies playing ‘important roles’. Some payment service providers (PSPs) will be able to function as DS PSPs, tasked with connecting end users to the system and enabling operation on it.
The Bank of Israel has made more progress than most with the creation of a CBDC. Other jurisdictions are also still in the investigational stage, such as the UK and EU, where the Bank of England (BofE) and European Central Bank (ECB) have been probing a digital pound and euro, respectively, for some time.
As it stands, only three countries have fully launched a CBDC, the Bahamas, Jamaica, and Nigeria, but more than 60 are in the process of investigating and/or developing one. In contrast, the leadership of the world’s largest economy, the US, remains bitterly opposed.
US President Donald Trump, who was inaugurated for his second term in January, is a vocal opponent of CBDCs, meaning the chances of a digital dollar are likely zero for at least the next four years.
Much of the concerns around CBDCs, which have been voiced by Trump and his supporters, relate to privacy. The Bank of Israel has moved to address these concerns with its own CBDC, arguing that the level of privacy with the DS ‘will be higher compared to existing digital means of payment’ and that it will offer ‘the possibility of anonymous payments but in limited’ amounts.
