Through a recent document, the Bank of Israel has revealed the plan for the introduction of the ‘digital shekel’: two CBDC models are envisaged.
The document dated March 11 unveils the plan for the development of the digital shekel, as well as its potential dissemination through national digital wallets. Two types of CBDC will be evaluated: one wholesale, dedicated to money transfers between financial institutions, and one retail, intended for daily expenses. Each wallet will have a balance limit.
The Bank of Israel (BoI) has determined that by December 2024, a feasibility study will be published to establish the official launch of the project.
Privacy concerns are addressed in the document: the BoI ensures that data on balances, user transactions, and personal information will be collected from a central database and stored using pseudonyms. However, in case of necessity, the BoI has stated its ability to identify users, albeit without direct access to their personal data.
The document also addresses the potential exemption of interest by commercial banks. Currently, Israeli commercial banks pay 4.86% interest on customers’ shekel savings and deposits. According to the plan, commercial banks will be exempt from interest if they decide to include the national CBDC in their short-term liquidity reserves. This move aims to encourage the adoption of the digital shekel.
