Israel could launch CBDC if stablecoin usage rises.
The Bank of Israel opposes private corporations taking control the country’s digital payment system.
Although no formal decision has been made, the Bank of Israel says it is creating an action plan for the future launch of a central bank digital currency.
On April 17, the Bank of Israel’s Steering Committee on the Potential Issuance of a Digital Shekel described alternative possibilities for the development and implementation of a CBDC, dubbed “SHAKED.”
It presented numerous possibilities that could result in the creation of a digital shekel, one of which was increasing stablecoin activity.
Increased acceptance of stablecoins may harm the payment system, it said, before adding that stablecoins that are not tied to the shekel may also harm monetary transmission.
“At this point, there are no signs of substantial adoption of stablecoins as means of payment in Israel. However, paying habits of the public might change rapidly, for instance in a scenario of issuance by a major private sector entity.”
Another potential driver of CBDC development, according to the committee, is a fall in the use of currency in Israel. While cash is still utilised in a substantial share of consumer transactions in the country, the committee believes that a movement in public payment patterns may result in a shift away from using central bank currency.
Because the Bank of Israel does not want this scenario or private companies regulating payments, a CBDC could be the answer.
It also stated that the issuing of a CBDC will be considered in order to support competition in the payments system and the financial system in the digital era.
It added that if the United States or the European Union issue a CBDC, it will affect Israel’s decision to deploy one.
The Bank of Israel Steering Committee concluded that the issue was being monitored in order to advance the digital shekel.
In terms of cryptocurrency legislation, Israel appears to be trailing the United States. The country’s securities authority proposed legislation earlier this year that would designate crypto assets as securities in the country.