Bank of Israel (BOI) has postponed the launch of the digital shekel until the European Central Bank (ECB) unveils its digital euro, Reuters reported. BOI will wait for major Western central banks to take the first step in adopting central bank digital currencies (CBDCs).
Digital Shekel Debut
BOI's Deputy Governor Andrew Abir told the media publication: "We are all waiting for the first western central bank to pull the trigger, which is almost certainly going to be the ECB. And then you may see a rush of countries going forward with it."
As of March, 134 countries, encompassing 98% of the global economy, are exploring digital versions of their currencies. China leads with advanced pilot programs, while the US Federal Reserve lags behind. The Bank of Israel initiated its exploration into CBDCs in 2017, aiming to enhance its payments system.
The BOI's interest in a digital shekel intensified in November 2020. Collaborating with central banks from Hong Kong, Sweden, Norway, and the Bank for International Settlements. BOI has been testing its digital currency in an initiative termed the "Digital Shekel Challenge," which invites fintech and traditional financial companies to showcase potential use cases.
Despite these efforts, the BOI is uncertain about the eventual launch of a digital shekel. The current experiment serves as an "action plan" to be implemented when deemed necessary and appropriate.
The ECB shares similar hesitations, with the potential introduction of a digital euro still uncertain. Europe's dependence on cross-border payment services from US giants like Visa and Mastercard adds to the complexity.
Public Adoption Uncertainty
Abir highlighted the challenge of public adoption, stating that the concern is whether the public will adopt a digital currency. The BOI is conducting a behavioral study to understand the public willingness to embrace a digital shekel.
Abir also pointed out the gap between theoretical studies and practical usage. He said that some studies are pushing people to use digital currency. However, he maintains that there should be a good set of use cases.
As the BOI waits for the ECB's move, the global financial community remains keenly interested in how digital currencies will reshape economies and payment systems. The success of the digital euro could pave the way for Israel's digital shekel and potentially revolutionize global financial transactions.
This article was written by Jared Kirui at www.financemagnates.com.
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