On Tuesday, the Bank of Israel has refused permission to issue a cryptocurrency which is equivalent to the national currency Shekel. The reason for the refusal was a 2017-made research report by the central financial institution.
The report has apparently found that the crypto-version of the Shekel will not have much utility value to its people, especially in certain areas.
No Crypto Shekel
The report was created by the collaborative efforts of two teams – the Finance Ministry and the Bank of Israel – to weigh the need for a Central Bank digital Currency (CBDC). The evidence considered by the researchers included provision for faster as well as immediate payment processes besides considering the unreported sections of the economy which eventually resulted in tax receipts.
Though the report does not strike out issuing a CBDC in the long term, there shall be no issuing of crypto Shekel.
The Bank of Israel also argued that the time is not yet arrived for the country to issue a CBDC, similar to other economies which are considering alternatives such as DLT or their own CBDCs but are not able to issue on because of the lack of ‘advancement’ in the society to support such currencies.
The only exception thus far has been Venezuela which has its own CBDC. However, the use and adoption of the currency are impeded since there are innumerable controversies and failures reported.
In the long-term
The central bank also considers the use of CBDC in the exceptional case where the central bank is a liability and there is a drop in cash usage as in the case of Sweden. The country also considers a CBDC as an ‘additional monetary tool,’ and this is currently not an option it would like to consider.
Besides, there are additional issues with implementing a CBDC strategy, the regulatory body opines. These new set of risks could prove to be a bigger challenge for the country’s financial system. Hence, the report has recommended ongoing research of the potential impact of crypto Shekel along with developments happening in this sphere in other economies.