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Israel welcomes Central Bank plans to create a digital currency

Israel welcomes Central Bank plans to create a digital currency

The Bank of Israel got public approval to develop a central bank digital currency but is still uncertain about the purpose of developing it.

According to Reuters, respondents believe the digital shekel will boost competition in the payments market. However, there are still controversies about privacy issues. For example, some respondents want complete anonymity when dealing with the digital shekel, just like with cash circulation. Others believe that the digital shekel should be subject to anti-money laundering rules and help fight the black economy. Some of the respondents also said that the digital shekel should have zero or extremely low cost to business owners and consumers while also being easy to use for everyone, including the elderly.

Because of the controversy, the Central Bank has officially stated that "The Bank of Israel has still not made a final decision on whether it will issue a digital shekel. But all of the responses to the public consultation indicate support for continued research regarding the various implications on the payments market, financial and monetary stability, legal and technological issues, and more."

Recall that the Bank of Israel started to consider issuing digital currency back in late 2017. A year later, the regulator branch concluded that it was not yet time to issue digital currency. In May 2021, the central bank announced it would reconsider the possibility of issuing a digital shekel. The regulator also added that the decline in private deposits would lead to higher interest costs for the banking system and, consequently, to lower net profits.

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