Yesterday the Israeli press reported that the Deputy Governor of the Bank of Israel, Andrew Abir, said that the central bank has already issued a central bank digital currency (CBDC) as part of an internal pilot program. He previously estimated only a 20% likelihood of a digital shekel.
“It’s risen a little over the past year, mainly because of other countries also focusing on it, but there is still less than a 50% chance,” the Globes reported. In May, the central bank published a working paper and invited discussion and feedback.
Abir noted that some had expressed a hope that a CBDC might eliminate banks. “I’m sorry to tell you, but this is not going to eliminate the banks. No central bank would bring in a digital currency with such an aim. The banks are still an important part of any payments system that there will be,” said Abir.
He continued, “The second thing that will perhaps disappoint you is that the digital currency of a central bank won’t come to protect bitcoin. What we are talking about is a payments system. Bitcoin is not a payment system and is not a currency – in the best case scenario, it is a financial asset, and in the less good scenario, it is a pyramid fraud.”
The Jerusalem Post also reported his comments on Israel’s payments system, saying it is a decade behind other countries, but the recent rollout of features such as contactless has helped to catch up somewhat. But the payments area is evolving rapidly.
“We are in the middle of a process of disruptive technology, and we do not know who are going to be the winners,” said Abir. “Will it be the banks, credit-card companies, fintech or big technology companies? There will be changes in the next few years that we do not yet know about. But it is clear that the environment in five years’ time will not be the same as the environment today.”