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Bank of Israel’s Digital Shekel Initiative
The Bank of Israel (BoI) is intensifying its efforts to develop a central bank digital currency (CBDC) known as the “digital shekel.” Recently, on May 28, the bank unveiled plans for the CBDC’s payment use case through the ‘Digital Shekel Challenge’ experiment, a crucial component of its strategy for potential CBDC issuance.
Israel Digital Shekel Challenge
The central bank announced the launch of the “Digital Shekel Challenge,” drawing inspiration from Project Rosalind, a collaborative effort between the Bank for International Settlements (BIS) and the Bank of England focused on digital currency API development.
As part of this initiative, the Bank of Israel will create a sandbox environment and API layer, inviting participation from private, public, and academic entities to develop real-time CBDC payment systems for public use.
Program Phases
- Applications/presentations
- Access to the new network for selected projects
- Final presentation to judges
The BoI emphasized its preference for “original and innovative” payment applications, whether enhancing existing systems or introducing entirely new solutions, including for specific use cases.
Collaboration for Success
Deputy Governor Andrew Abir expressed his support for the digital shekel, highlighting the transparent development process led by the central bank. He emphasized the importance of collaboration between the Bank of Israel, the private sector, and the government for the digital shekel’s success.
Abir also noted that competition between CBDCs and traditional banks could have positive economic implications, potentially leading banks to offer higher interest rates on deposits.
Public Feedback and Privacy Concerns
In March 2024, the Bank of Israel announced plans to introduce an interest-bearing CBDC after years of research and preparation. Public consultations conducted in 2021 revealed widespread support for the digital currency research, although some individuals raised privacy concerns.
The BoI collaborated with Hong Kong’s central bank and the BIS on Project Sela, testing a retail CBDC that prioritizes user accessibility, competition, cybersecurity, and cash benefits. The central bank assured that a digital shekel would offer privacy protections equivalent to or potentially exceeding those of digital payments.
Ian is a cryptocurrency enthusiast blending humor with professionalism. With an engineering background and a storyteller's heart, he simplifies the blockchain world with sharp analysis and a touch of wit. At Cryptowire, he brings his unique perspective to make digital financial innovation accessible to all.
