Israel Wants to See ‘Significant’ Use of Stablecoins for Payment Before Considering Digital Shekel
Israel says that a decision by the EU or the US to issue a centrally controlled digital asset would be an ‘important factor’ in considering its own CBDC
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A digital shekel is still a ways off, according to a report from the Bank of Israel.
While the bank said that there has been no decision made either in favor or against a digital shekel, a handful of scenarios could force Israel to act.
The US or European Union announcing a CBDC would be an “important factor” in its decision. The Bank claimed that the probability that developed economies — outside of the US or EU — issuing a central policy in the next few years is “significant.”
The Bank of England is currently mulling over a digital pound, and the UK is also looking closely at stablecoins for payments.
The BOE, alongside the UK Treasury, released a paper in February outlining considerations from both entities on a digital pound.
The digital pound would be a “safe, trusted form of money accepted for everyday transactions by households and firms, in the same way as Bank of England notes are today” which is different from other cryptocurrency assets which are “highly speculative assets, whose value is extremely volatile, because there is nothing behind them.”
Cash is king — for now — but a change to the use of cash by Israelis would potentially cause the bank to reconsider digital currency.
“The public’s ability to use central bank money is important both in maintaining the public’s trust in other means of payment, since it can always convert those into central bank money, and in order to maintain individuals’ and businesses’ ability to make transactions while minimizing the intervention of private entities,” it said.
The bank is also considering technological advances that would justify a digital currency, similar to the US approach.
Later this summer, the US plans to roll out FedNow, which is a “modern instant payment solution” that connects financial institutions across the country. Fed Governor Michelle Bowman said that the service “addresses the issues that some have raised about the need for a CBDC.”
The US Treasury and lawmakers are still weighing the consequences of issuing a CBDC, but rollouts such as FedNow could help to engage in the “technological development of a CBDC so that we would be able to move forward rapidly if a CBDC were determined to be in the national interest,” said Nellie Liang, the undersecretary of the Treasury for domestic finance, in a speech.
As with other economies, the Bank of Israel noted that it is in a “holding pattern” until it has seen evidence that either convinces or dissuades Israel from pursuing its own digital currency.
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