Israel’s Digital Shekel Plans Hinge on ECB’s Digital Currency Move

Israel’s central bank, the Bank of Israel (BOI), is actively considering the development of a central bank digital currency (CBDC), referred to as a digital shekel, as a means of modernizing the country’s payment system and fostering innovation. However, BOI Deputy Governor Andrew Abir has indicated that the bank is awaiting the launch of a digital currency by a major central bank, likely the European Central Bank (ECB), before proceeding with their own digital shekel plans. This cautious approach aligns with the global trend, as nearly all countries, accounting for 98% of the global economy, are exploring the potential of introducing digital currencies. While the BOI has ramped up its efforts and even launched the “Digital Shekel Challenge” in 2020, uncertainty remains surrounding the future of the digital shekel. Approval from the finance and justice ministries is required, and the widespread adoption of the digital shekel by the public is also seen as a significant hurdle. Nevertheless, the digital shekel has the potential to revolutionize payment systems by introducing competition to bank deposits and leveling the playing field for payment providers in Israel’s concentrated banking sector.