A digital Shekel (digital currency) is being tested by the Bank of Israel. BOI Deputy Governor Andrew Abir revealed during a talk at the Fair Value Forum of IDC Herzliya that a pilot program has been underway. Globes reports that this may have been an accidental slip of the tongue on the part of Abir.
A digital Shekel, or any digital currency, should not be confused with cryptocurrencies like Bitcoin. Cryptos are just that, virtual money with no real value or backing. Digital currencies are simply a new form of money backed by whatever nation releases them. In this way they are as sound as the respective countries’ paper money. In this way the advent of digital currencies may simply be a way of acknowledging that the future is already here and everything is moving to digital systems and cashless payments.
Just last month the BOI reported that it has been considering a trial for digital currency. The Bank of Israel stated that it had been examining the issue of central bank digital currencies (CBDC) since 2017. But the BOI also stated that it had has not yet decided whether it intends to issue a digital shekel. But in view of the rapid developments in the digital economy and in payments, and in view of the major central banks’ work on the issue, the Bank of Israel said that it is accelerating its research and preparation for the potential issuance of a digital shekel.
The Bank of Israel prepared an action plan so that if conditions develop in the future that lead to a Bank of Israel assessment that the benefits of issuing a digital shekel outweigh the costs and potential risks, the Bank of Israel will be prepared to put this plan into action.
BOI Deputy Governor Andrew Abir was reported by Globes as saying that, “Part of the enthusiasm of people outside of the bank to our report on the digital shekel stemmed from the hope that the digital currency would eliminate the banks. I’m sorry to tell you but this is not going to eliminate the banks, no central bank would bring in a digital currency with such an aim. The banks are still an important part of any payments system that there will be. The second thing that will perhaps disappoint you is that the digital currency of a central bank won’t come to protect bitcoin. What we are talking about is a payments system. Bitcoin is not a payment system and is not a currency – in the best case scenario it is a financial asset, and in the less good scenario it is a pyramid fraud.”