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The ‘Digital Shekel’: Israel is Working on a State Cryptocurrency

Last Updated March 4, 2021 5:03 PM
Samburaj Das
Last Updated March 4, 2021 5:03 PM

Israeli authorities are reportedly considering issuing a cryptocurrency that would be identical in value to the shekel, Israel’s fiat currency.

Both Israel’s finance ministry and the central bank are exploring the possibility of issuing a national digital currency titled the ‘digital shekel’, the Jerusalem Post  reports. Regulators have been considering the legal parameters of issuing a central bank cryptocurrency for ‘several months’ while authorities could table a review of an early legal framework as soon as January 2018, according to the report.

As reported yesterday, a finance official confirmed that the digital currency would be based on a blockchain with the intent to introduce a faster, instant payment infrastructure over the current centralized system. The Jerusalem Post report weighs in with additional details, citing an official who revealed that the ‘digital shekel’ would be made available to citizens over a smartphone where every transaction is recorded and the cryptocurrency itself to be stored in a digital wallet. The cryptocurrency will be issued by the central bank and is the digital equivalent of the physical currency shekel, in value.

The digital shekel will be peer-to-peer and will not require a clearing system or a centralized authority to oversee transactions.

The official reportedly stated:

You can imagine that instead of giving you a piece of paper saying the Bank of Israel on it, I can send you a piece of digital code that was issued by a central bank.

Issuing a digital currency over a blockchain where all transactions are recorded and immutable will also ‘make it more difficult to evade taxation’, the official added.

Still, in its early stages, the plan to introduce a cryptocurrency has no public timeline just yet. Further, the Bank of Israel would require approval from Israel’s national legislature, the Knesset, to issue a state cryptocurrency.

Other ministries and laws would also be relevant in pushing through legislation to introduce the ‘digital shekel’. The official said:

There’s a lot that people need to think about before going through with this reform. We’re looking at the legal, financial, regulatory and money-laundering sides of this.

The developments come in a year when Israel’s tax authority has deemed bitcoin a taxable asset while Israel’s securities regulator outlined a ‘friendly’ approach to initial coin offerings (ICOs), a popular new form of fundraising powered by cryptocurrencies.

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