Bank of Israel remains unsure of CBDC even amid public support

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Despite the research it has carried out, the Bank of Israel (BOI) continues to remain skeptical about the benefits that will be derived from issuing a central bank digital currency (CBDC).

The Israeli central bank shared its views in a report it published to summarize the public opinion it has been getting since May 2021, when it started conducting a survey. Per the document, the central bank received a total of 33 responses from “various sectors in Israel and abroad.”

The BOI highlighted that most respondents believed that issuing a digital shekel is welcome. This is because the CBDC would help Israel’s financial sector and payment system improve competition, support innovation, and advance financial inclusion.

The respondents also pointed out that a digital shekel would reduce reliance on cash which is expensive to maintain, as well as advance the fintech industry.

Regardless, the BOI stated that it has still not made a final decision on whether or not it will issue the CBDC. But, it remains open and transparent in its work on the CBDC.

“As stated, the Bank of Israel has still not made a final decision on whether it will issue a digital shekel, but all of the responses to the public consultation indicate support for continued research regarding the various implications on the payments market, financial and monetary stability, legal and technological issues, and more,” the report surmised.

BOI is still committed to being CBDC pioneers

The latest BOI report is coming after Reuters noted in March that Israel could be closer to issuing the CBDC. At the time, Amir Yaron, governor of the central bank, disclosed that a digital shekel would not harm the country’s banking sector.

Before them, Yaron stated that the BOI was stepping up its effort to issue the digital shekel to meet up with “being at the forefront of economic and technological knowledge in this field.”

Meanwhile, Israel has also been adjusting its digital currency regulation. The BOI passed a draft bill to regulate digital currency firms in March. The bill opens the door for digital currency firms to access banking services in the country.

The responsibilities of both banks and VASPs were spelled out in the bill that was developed by the BOI’s Banking Supervision Department and includes provisions for combating money laundering and terrorism financing.

To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.

Watch: CoinGeek New York presentation, Digital Currency as a Tool for Financial Inclusion