Today the Bank of Israel published a working paper exploring the potential of creating a network effect to encourage the adoption of its central bank digital currency (CBDC), the digital shekel.
It outlines three key potential triggers to generate a network effect. The government is described as “the largest merchant in the country”. Hence using a digital shekel to pay fines and taxes as well as receive benefits would immediately create adoption at scale. Additionally, the government is Israel’s largest employer, so salaries are another use case.
The second prong of the network effect is a convenient user experience. Consumers should be able to use the same methods they use today, and so should merchants, ideally. For businesses accepting payments, the costs should be lower than current alternatives.
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