Israel will not be joining the list of countries to issue a Central Bank backed Digital Currency (CBDC), at least not for the meantime. A report released earlier this week by the Bank of Israel warned that a move in that direction should not be made after carefully studying the matter for nearly a year.
Here are the reasons provided by the premier bank with regards to why Israel should not launch a digital currency whose value is equivalent to the shekel.
No Advanced Economy Has A CBDC
A primary reason why the research team willfully spoke against the introduction of a CBDC is that no advanced economy around the world has given a green light to one. However, the team conceded that many central banks are currently evaluating whether or not to roll out a CBDC.
Denmark and Australia were cited as examples of countries who have declared their lack of interest in cryptocurrencies while only Sweden is currently on their way to launching one. Venezuela is another country which has launched a CBDC, but the nation’s economy has been in big crisis ever since.
CBDC Use Case Not Found In Israeli
In the event of reduced cash usage, a CBDC will allow the central bank to maintain public access to its liability. This is one of the primary reasons why Sweden is looking to launch a CBDC, but the BoI team argues that such a situation does not apply to the Israeli economy at the moment.
CBDC Similar to Fiat Payment System
Some similarities were outlined in the report to detail how a central bank backed digital currency compares with other fiat payment systems already used in Israel. For one thing, both payment systems are convenient and settle immediately.
Also, they can facilitate offline transactions and grant users a certain level of anonymity. The team believes that since the proposed CBDC would fill in the same job done by fiat systems, there is no need to go ahead with it.
Conclusively, some risks and petitions would be associated with introducing a CBDC since it will have a profound impact on existing payment systems. These risks are still unclear at the moment, and the team said it would prefer to keep an eye on how the technology develops in other countries.
There is still a chance that Israel will introduce a central bank backed digital currency. However, the BOI has said that it will not be in the near future.