Today the Bank of Israel released a paper on the architecture of its planned central bank digital currency (CBDC), the digital shekel. It differs from other CBDCs in a few ways. One of them is the ability to pay interest. Another is the separation of the role of banks from the provision of wallets and payment services.
It’s likely the central bank will publish multiple papers this year as the target date for a design document is December 2024. The central bank still needs to make technology decisions, such as whether to use DLT, so the document covers the functional architecture.
In most retail CBDCs, a user would have a CBDC wallet with a bank or payment provider with which they already have a relationship. The same provider helps to fund and defund the CBDC wallet directly and communicates CBDC payment instructions. In contrast, Israel’s central bank envisions an unbundled solution.
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