Plus   Neg

Israel's Central Bank Advised Not To Issue Digital Currency In Near Future


The Bank of Israel has been recommended not to issue central bank digital currency (CBDC) in the near future. The recommendation comes from an interdepartmental team formed in November 2017 to explore the feasibility of issuing CBDC. The team was established by the Central Bank Governor Dr. Karnit Flug.

The team observed that central banks around the world are examining the possibility of issuing digital currency and/or using distributed technologies in the payment systems, but no advanced economy has yet issued digital currency for broad use.

The team noted that it is necessary to continue examining the field and to follow developments around the world before there are proper grounds for a decision to recommend issuing digital currency.

The Bank of Israel published the summary of the work done by the team to bring it to the public's attention, and to enable public discussion on the issue.

One objective of issuing CBDC such is maintaining public access to the central bank's liability, in the event that the use of cash declines significantly as is happening in Sweden. Issuance of CBDC in the form of e-shekel is to support the payments system and make payments more efficient. It can also be an additional monetary tool, though it will not be the main objective of issuing it.

The report said there is currently no uniform specification globally for issuing CBDC, pertaining to its accessibility, the method of issuance, the extent of anonymity in its use, and whether it will bear interest.

Though a few central banks in developed countries are in advanced stages of examining the feasibility of issuing CBDC, there are others who do not plan to issue it in the near future. It could be due to the payment systems in their countries being efficient and providing good alternatives.

It is expected that the issuance of CBDC will have an impact on the central bank as it issues and manages cash, and conducts monetary policy, and on the payments system. The team will study the risks in the issuance of CBDC, and the potential impact on the financial system.

It will report to the Bank of Israel's management semi-annually about its activity and about significant developments in the field.

For comments and feedback contact: editorial@rttnews.com

Business News

Follow RTT