Israel Unveils Digital Shekel Design, Joining Global CBDC Trend

Israel has made significant strides in its central bank digital currency (CBDC) plans, unveiling a preliminary design for its official digital shekel (DS). This move aligns with the growing global trend of CBDC projects focusing on key issues such as anonymity, architecture, and ecosystem roles.

The Bank of Israel's Steering Committee published a proposal outlining the project's key components, including its supporting ecosystem, functional capabilities, technical architecture, regulatory framework, and future plans. The central bank believes that the CBDC could benefit public interests, with the digital shekel expected to offer a wide range of benefits to all segments of the population, including children, foreigners, businesses, public institutions, and financial entities.

Israel's CBDC is envisioned as a dual-purpose currency, catering to both retail transactions for individuals and businesses, as well as wholesale transactions for financial institutions. The central bank will maintain control over the issuance and system rules of the digital shekel, while private-sector Payment Service Providers (PSPs) will manage customer onboarding and frontend services. The digital shekel is also expected to offer key features like offline functionality and interoperability with other payment systems.

Israel's CBDC plans come amidst a global surge in interest in centralized digital currencies. As of now, nearly 134 countries and currency unions are exploring a centralized digital currency, representing 98% of global GDP. Three countries, the Bahamas, Jamaica, and Nigeria, have fully launched their CBDCs, while the BRICS nations and the European Central Bank are currently testing or developing their own CBDCs.

Israel's CBDC update contrasts with the United States' plans to adopt Bitcoin, XRP, SOL, and ADA for the national crypto reserve. These diverse approaches by Israel and the US showcase the different paths countries are taking in the realm of digital currencies. As these initiatives progress, it will be interesting to see how they shape the global financial landscape.