The Bank of Israel is in the process of preparing an action plan for the potential issuance of a digital shekel. In a recent document, the bank discussed the conditions that would enable or support a decision to issue a BOI Central Bank Digital Currency (CBDC) at some point, indicating a number of variables that may have an effect on the Steering Committee’s recommendation.
A CBDC is a digital currency issued and backed by a central bank, representing a digital version of a country’s fiat currency. CBDCs are designed to be used as a medium of exchange and store of value, just like traditional currency.
Some may think this sounds something like the popular cryptocurrency Bitcoin — however, unlike decentralized cryptocurrencies like Bitcoin, CBDCs are centralized and controlled by a central authority, such as a central bank or monetary authority.
One of the main advantages of CBDCs is that they offer faster, cheaper and more secure transactions compared to traditional payment methods. They also provide a digital alternative to physical cash, which is becoming less commonly used in many countries. However, CBDCs also raise concerns about financial stability, privacy and cybersecurity risks that need to be carefully considered and addressed.
