- The Central Bank of Israel has adopted Ethereum to run an internal pilot of the digital shekel.
- The concept of issuing digital shekel has been in discussion since 2017
The Bank of Israel has for some time now been working on its Central Bank Digital Currency (CBDC). The development is in its advanced stages with Deputy Governor Andrew Abir recently disclosing that the country has run a pilot test.
According to a report by Israeli financial daily Globes and as reported by Bloomberg, the country’s supreme bank has adopted Ethereum Technology to run an internal pilot of the digital Shekel. However, the publisher’s main source was not revealed.
The concept of issuing digital shekel has been in discussion since 2017. Authorities had to accelerate their research and preparation for the digital currency considering that development in the digital economy and payments has rapidly grown. The concept of issuing a CBDC was plausible, but some high-profile officials had doubts about its successful implementation.
According to Abir, his confidence in the launch of the digital Shekel is high now.
I had previously estimated that the chance of having a CBDC within five years is 20 percent. My estimate has increased a bit in the last year, mainly because other countries are advancing with it too. But still, there is less than a 50 percent chance.
The Bank of Israel deputy governor mentioned that the payment system in the country has been at least a decade behind other countries. However, the distribution of infrastructure to accommodate contactless payment and the influx of digital wallets have enabled them to close the gap.
CBDC gaining momentum
When responding to the common misconception that a CBDC is meant to offer protection against Bitcoin, Abir stated that the purpose for any Central Bank introducing a digital currency has nothing to do with Bitcoin.
Bitcoin is not a payment system, and it is not a currency. In the best situation, it is a financial asset, and in the worst case, it is a pyramid scam.
CBDC relies on distributed ledger technology such as blockchain, but different from cryptos. Efforts to develop CBDC are gaining momentum as over 60 countries are currently exploring or actively developing their digital currency according to PwC. China has already launched pilot programs for the digital yuan in several mainland cities.
The European Central Bank (ECB) has recently finished its public consultation for its digital Euros. Christine Largade, president of ECB stated that they will decide the way forward in mid-2021. If decisions are made to move forward with the currency, its roll-out will take four years to complete.