Israel Releases Preliminary Design for Digital Shekel
The Bank of Israel has unveiled a preliminary design for the Digital Shekel (DS), a potential Central Bank Digital Currency (CBDC) for Israel. However, there is currently no formal decision to officially launch it.
Overview
On March 3, the Steering Committee of the Bank of Israel released an initial blueprint for the central bank’s self-developed digital currency. The report outlines the supported ecosystem, functionalities, technical design, regulatory considerations, and next steps.
Motivations Behind the Digital Shekel
Previously, the Bank of Israel identified six possible motivations for issuing the Digital Shekel, including:
- Creating an alternative payment system and infrastructure
- Reducing transaction costs
- Enhancing privacy protections
- Assisting the government in combating the "black economy"
CBDC Benefits for the Public
"The Digital Shekel is expected to bring broad benefits to all sectors of society. It will be accessible to everyone, including children, foreigners, businesses, public institutions, and financial entities."
Private Sector Participation
According to the current plan, the Bank of Israel will be the sole issuer of the Digital Shekel. However, private-sector participants will assist with user registration, deposit conversion, and advanced financial services.
Key Features of the Digital Shekel
- Offline usability
- Interoperability with other payment systems and digital asset networks
- Instant settlement capabilities
"The Digital Shekel will interoperate with other payment systems, allowing users to send or receive payments even if the counterparty does not use the Digital Shekel."
Gathering Feedback on CBDC Design
As part of the research and evaluation process, the Bank of Israel has launched the "Digital Shekel Challenge", encouraging technologists and businesses to demonstrate real-world use cases for the CBDC.
The final decision on whether to launch a CBDC in Israel will be made after 2026, based on further research, public feedback, and regulatory considerations.
The Bank of Israel will collect public feedback and recommendations on the CBDC design until April 30, 2025. Additionally, it will issue Requests for Information (RFI) to technology providers to gather ideas regarding CBDC implementation.