Today the Bank of Israel released a working paper on a central bank digital currency (CBDC) intended as a basis for discussion and feedback. The Bank emphasized it has not yet made a decision to launch a digital shekel but is creating an action plan to be prepared if the benefits start to outweigh the risks.
Numerous central banks worldwide are exploring the topic with increased zeal, which appears to be the main trigger behind the publication of the Bank’s document.
It includes a draft model of a potential CBDC, which is similar to many proposed around the world. There would be a two-tier model in which the central bank issues a digital currency, but it is distributed via payment service providers. The digital shekel will always be a liability of the central bank, and its core systems may be centralized or use distributed ledger technology (DLT).
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