Digital Shekel
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.'
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 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 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.
The Bank of Israel places significant emphasis on safeguarding users of the Digital Shekel, ensuring it adheres to the highest standards of information security and protection against cyberattacks. While consumer fraud remains a risk in digital payments, users of the Digital Shekel will generally enjoy consumer protections akin to those found in existing digital payment methods. Furthermore, advanced technological systems will provide a robust security framework to help prevent fraud.
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.
To ensure inclusivity across all segments of the population, it is crucial to provide means for using the Digital Shekel that cater to individuals with low digital literacy. While the primary usage is expected to be through smartphones and computers, the Digital Shekel will also be accessible via various other means, such as smart cards, non-smart mobile phones, wearable devices, and more.
Many central banks around the world are investigating the concept, engaging in research, technological trials, or a combination of both. Some countries have already issued a central bank digital currency. However, no developed nation has officially declared a decision to issue such a currency.
Not in the conventional sense. While the Bank of Israel will issue the Digital Shekel, access will be facilitated by private sector 'payment service providers.' These providers will be responsible for delivering services and fostering innovation related to the Digital Shekel, granting consumers - end users - access to a digital wallet through which they can make payments in Digital Shekels.
No. Unlike some cryptocurrencies, which require complex verification processes demanding substantial computing power and electricity, the Digital Shekel will not employ such energy-intensive technologies. Its energy consumption is expected to be comparable to that of existing payment systems.
Converting money from bank accounts into Digital Shekels is similar to withdrawing cash, which, on the surface, reduces a bank's resources and its capacity to extend credit. On a large scale, this could impact the availability of credit in the economy and/or increase its cost, and in extreme scenarios, even threaten the stability of the banking system and the financial stability of the economy. An analysis indicated that under reasonable scenarios of Digital Shekel adoption, the profitability of the banking system might be affected, but stability is not expected to be compromised. However, this analysis was conducted under relatively strong assumptions and in a macroeconomic environment different from the current one.
In designing the Digital Shekel, a variety of factors will be considered to ensure that the banking system's ability to perform its functions in the economy is not impaired, nor is stability compromised. For instance, there may be limits imposed on the amount of Digital Shekels each user can hold. These limits will be meticulously crafted to achieve their purpose while minimally impacting the convenience of using and transacting with the Digital Shekel. Such mechanisms are also being explored by other central banks.
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.
No. The Bank of Israel's stance is that it issues currency, not "vouchers." Just as cash has no expiration or usage restrictions, the Digital Shekel will be unrestricted and usable wherever it is accepted. However, users will have the option to implement advanced payment features with the Digital Shekel, allowing them to set personal restrictions. For instance, applications could be developed to enable parents to set purchase restrictions on their child's wallet for online transactions.
At this stage, no decision has been made regarding the technology on which the Digital Shekel will be based. Various technological options are under consideration.
The Bank of Israel has not yet reached a decision regarding the issuance of a Digital Shekel. In March 2025, a preliminary design document for the Digital Shekel was released for public consultation. As part of this initiative, the bank is evaluating the anticipated benefits alongside the potential costs and risks associated with its issuance. A document published in 2023 outlined conditions that may influence the decision to issue a Digital Shekel, including the issuance of CBDCs by other countries, significant adoption of a stable coin as a widely used payment method, and ongoing centralisation in the local payment system. It is important to note that if the Bank of Israel decides to proceed with the issuance of the Digital Shekel, it will likely involve a legislative process in the Knesset.