Israel’s central bank is stepping up its central bank digital currency (CBDC) efforts, Governor Amir Yaron has revealed. In a recent conference, he said that CBDCs are the future of finance and will give central banks an effective monetary policy tool as the payments paradigm shifts.
Israel is one of the world’s tech powerhouses and has pioneered some of today’s leading technologies. However, with CBDCs, the Middle Eastern country has lagged behind countries such as China who are aggressively pursuing their own digital currencies.
The governor of the Bank of Israel (BOI) has revealed he intends to place Israel back among the pioneers in this exciting new field. Yaron said the central bank is accelerating its study and preparation for the possible issuance of a digital shekel as it seeks to create a more efficient payments system.
For now, the bank has not yet made a decision on whether it will issue a CBDC. However, it’s conducting research to ensure that if it ever decided to issue a digital shekel, all the systems will be in place.
“We are committed to being at the forefront of economic and technological knowledge in this field,” he told the attendees.
Several other central banks are conducting research and feasibility studies on CBDCs, without committing to issuing digital currencies. One of these is France whose research has majorly focused on a wholesale CBDC while also participating in the research on a regional digital euro. The Bank of Japan has also been studying the feasibility of a digital yen, which it says would focus on simplicity and interoperability, without fully committing to launching one.
For Israel, the CBDC journey has come full circle. Back in 2017, the BOI considered the possibility of a digital shekel, but the next year, a team it had established to look into the CBDC advised against it. In May this year, the bank once again revived these efforts and said that the CBDC could help its economy.
According to Yaron, CBDCs are a natural response for central banks at a time when digital payment systems are threatening their ability to navigate monetary policies.
He concluded, “Therefore, central banks have a unique role to play in preventing fragmentation and ensuring that the payment system becomes even more uniform and efficient. One way to do this is through CBDC.”