The Bank of Israel is preparing to introduce a digital shekel: New Israeli Shekel (ILA) – Perspectives and Challenges.
The Central Bank of Israel Supports Central Bank Digital Currency
The Central Bank of Israel is planning to introduce a central bank digital currency called the New Israeli New Shekel (ILA) with an interest-bearing option. The new digital currency will be based on a two-tier model, offering instant payments, support for multiple transactions, offline usability, balance limits, and interest-bearing capabilities.
User Privacy at the Heart of the Project
The Central Bank of Israel ensures that despite having access to the necessary information for the system to function, it will not have access to personal data related to end-user balances and transactions. The project’s priority is to protect the privacy of individuals using the digital currency.
Commercial Banks as System Participants
Currently, commercial banks in Israel offer a 4.86% interest rate on fiat deposits in ILA. As part of the central bank’s plans, banks will have the option to hold ILA CBDC as part of their short-term liquidity reserves, without earning interest.
Finality of Decisions and Pilot Test
Decisions regarding the New Israeli New Shekel digital currency are not yet final due to the complexity of the system. At present, no specific pilot test has been conducted, which may impact the project’s further development.
The Future of Israel’s Digital Shekel
In April 2023, Cointelegraph reported on the Central Bank of Israel’s plans to introduce a digital currency. In case of the growing popularity of stablecoins, the central bank may accelerate the implementation process of ILA CBDC; however, stablecoins currently do not enjoy significant usage as a means of payment in Israel.
The introduction of a central bank digital currency in Israel may bring a range of benefits to both consumers and financial institutions, but the key lies in developing a system that ensures the security, privacy, and efficiency of transactions.
