Digital Shekel CBDC
What is the Digital Shekel?
How can you influence the design of the Digital Shekel?
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A Central Bank Digital Currency (CBDC) is a digital form of currency issued by a central bank, akin to physical cash in the form of notes and coins. In light of technological advancements, evolving consumer habits, and the transition to digital payments, the Bank of Israel is currently exploring the potential implications and ramifications of introducing a digital currency alongside traditional cash. In Israel, should it be introduced, this currency would be known as the 'Digital Shekel.'
The Digital Shekel will facilitate advanced and innovative payment applications that are currently not feasible, with transactions being immediate and final. Transaction fees are anticipated to be lower than those of existing digital payment methods, and it will offer enhanced privacy. Additionally, the Digital Shekel will be capable of offline operation, be accessible to all demographics, and allow for seamless conversion between it and other payment methods.
The Digital Shekel is expected to provide a user experience similar to that of current digital payment methods, yet it will feature several distinctive attributes. A key characteristic is its immediacy and finality, enabling the transfer of Digital Shekels between wallets within seconds, akin to cash transactions. Other notable differences may include the ability to conduct offline transactions, a higher level of privacy compared to existing digital payment methods, and advanced functionalities supporting innovative use cases.
The use of the Digital Shekel will not permit the Bank of Israel or government authorities to collect personal data on users. The Bank of Israel will not retain identifying information of wallet holders or their transaction histories. Personal data management will be entrusted to private sector payment service providers, with user information protected under privacy laws. Furthermore, under certain conditions—such as transactions below a specified amount or particular transaction types—anonymous payments may be possible, ensuring no identifying information is retained even by the payment service provider.
If introduced, the Digital Shekel will not replace physical cash. The Bank of Israel will continue to issue cash in the form of notes and coins.
The Digital Shekel will be fundamentally distinct from what are commonly referred to as "cryptocurrencies." It will represent a commitment by the Bank of Israel, ensuring its value remains stable, much like physical cash. In contrast, cryptocurrencies often experience significant value fluctuations, and even those marketed as stable coins have struggled to maintain consistent stability. This volatility, coupled with the often unclear entities behind cryptocurrencies, limits their widespread adoption as a payment method.
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