The Bank of Israel is currently considering the potential benefits of issuing a Central Bank Digital Currency (CBDC). A number of variables have been identified that might influence the issuing of a CBDC, including developments in other developed nations, such as the United States and the European Union. Another key factor is the changing use of cash in the country, and whether it may continue to fall and public confidence could be affected if cash usage were to drop significantly.

The Bank of Israel Steering Committee has recently explored certain criteria should a decision to issue a CBDC be made in the future, such as the amount of competition present in the domestic payment system and any technical payment improvements. It was further declared that the acceptance of stablecoins, which are not linked to the official fiat currency, could damage the transmission of monetary policies.

Also influencing the potential move of issuing a CBDC is external pressure from other major economies - such as from the European Central Bank President Christine Lagarde, who has recently warned that central banks must embrace digital currencies or risk becoming irrelevant.

In order to assess the possible dynamics of such a decision, the Bank of Israel has recently taken part in various initiatives, such as in a trial project with the Hong Kong Monetary Authority. More recently, the Bank has joined the “Icebreaker” project with the Bank for International Settlements Innovation Center, alongside the financial regulator of Sweden and Norway, to research retail CBDCs.

To sum up, although immediate plans to introduce a CBDC are not in the horizon, the Bank of Israel has publicly noted the potential positives of such a move, against the backdrop of changing monetary system dynamics and decreasing cash usage in the country. How instrumental a CBDC will become in the future in Israel remains to be seen and clearly depends on how the current situation develops.



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