Israel’s central bank has declared its support for digital currencies, the Israeli Shekel Central Bank digital currency (CBDC), with an option for interest accumulation. The Bank of Israel disclosed that the CBDC will operate on a two-tier model featuring 24/7 instant payments.
The central bank emphasized that it will have control over the system’s operation. Yet, it will not access personally identifiable information regarding end users’ transactions and balances. Currently, commercial banks in Israel offer 4.86% interest on order shekel deposits. Under the new plan, banks could include the shekel CBDC in their short-term liquidity reserves without accumulating interest.
The country has been examining a digital shekel since 2021, with no definitive pilot tests initiated as of now. The central bank stated that decisions are not final, citing the interconnectedness of various digital shekel system components.
In April 2023, the central bank suggested the possibility of issuing a shekel CBDC if stablecoin adoption increased, but no substantial adoption has been observed in Israel so far.
