The Bank of Israel is launching a CBDC use case testing program in an effort to improve the design of the digital shekel and ensure its ability to facilitate advanced applications.
“We are currently building the system and intend to officially announce the project in the coming weeks,” – Andrew Abir, deputy governor of the central bank, said in a statement on Tuesday.
The pilot program establishes a controlled environment for evaluating cutting-edge digital technologies, including financial innovations, before they are widely implemented. Governments are using it to foster innovation by allowing companies to experiment with these technologies under relaxed regulations.
The API-based program will facilitate the participation of financial institutions, financial technology companies and other relevant stakeholders. Here they can jointly develop and test innovative applications for the digital shekel.
The digital shekel will provide stability in contrast to the volatility of cryptocurrencies
During his speech, Abir characterized the digital shekel as “the Bank of Israel’s obligation to society.” He emphasized the currency’s similarity to physical cash, the possession of which does not carry credit risk. He also explained the need to distinguish the digital shekel from cryptocurrencies.
“The digital shekel will not be developed by some anonymous Satoshi Nakamoto,” he said – the official announced. “Everyone will know who is behind the digital shekel and who is responsible for it – it will be the central bank, the same Bank of Israel that is behind the cash we all know and trust.”
He assured that the value of the digital shekel will show stability, unlike cryptocurrencies, which can fluctuate significantly. “A digital shekel will always be worth one shekel in cash, which will always be worth one shekel in a bank account,” he said.
Bank of Israel’s plan for digital shekel availability
The official then emphasized the usefulness of CBDC. He explained that it will facilitate various transactions that are currently not possible with cash, such as those conducted in e-commerce.
The digital shekel will use a two-tier operating model, allowing a wide range of entities to participate in the platform as Payment Service Providers or Supplementary Service Providers.
It is worth noting that the Bank of Israel intends to make the platform it is building available not only to traditional banks, as is the current practice. But also to a wider range of participants, including payment companies, fintech companies, consumer clubs and others.
