FameEX Hot Topics | CBDC issuance being weighed by Israeli Central Bank amid growing stablecoin utilization

On April 17, the Bank of Israel Steering Committee on the Potential Issuance of a Digital Shekel released a report that presented various scenarios that could lead to the issuance of a CBDC, a digital shekel called “SHAKED”. One potential driver for the development of a CBDC is the increased use of stablecoins, which could impair the payment system and harm monetary transmission. Although there are no significant signs of stablecoin adoption as a means of payment in Israel, a major private sector entity's issuance could quickly change the public's payment habits. In this case, the Bank of Israel is considering issuing a CBDC to prevent private entities from controlling payments and to support competition in the payments and financial systems in the digital era.

Another factor that could lead to the issuance of a digital shekel is a decline in the use of cash in Israel. While cash is still used in a considerable portion of consumer transactions in the country, a shift in the public's payment habits may result in a move away from using central bank fiat. In this case, the Bank of Israel sees a CBDC as a potential solution. The Bank of Israel Steering Committee also stated that it would consider issuing a CBDC to keep up with the U.S. and European Union, which are also exploring the possibility of issuing CBDCs. If either of these regions issues a CBDC, it could influence Israel's decision to deploy one.

Overall, the Bank of Israel is considering the issuance of a digital shekel in response to several potential scenarios, including the increased use of stablecoins, a decline in cash usage, and the need to remain competitive with other countries exploring CBDCs. The committee is closely monitoring the situation to prepare for the potential issuance of a digital shekel. It is worth noting that Israel's approach to crypto regulation appears to be in line with the United States, as the country's securities regulator proposed legislation earlier this year that would classify crypto assets as securities. However, some industry executives are concerned that this could "kill the industry."

In conclusion, the Bank of Israel is exploring the possibility of issuing a digital shekel, also known as “SHAKED,” to address potential scenarios that could lead to the issuance of a CBDC. These scenarios include the increased use of stablecoins, a decline in cash usage, and the need to remain competitive with other countries exploring CBDCs. The committee is closely monitoring the situation to prepare for the potential issuance of a digital shekel.

Disclaimer: The information provided in this section is for informational purposes only, doesn't represent any investment advice or FameEX's official view.