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Israel Central Bank Considers Digital Currency for Instant Payments

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

The Bank of Israel is reportedly considering issuing a digital currency to support a real-time nationwide payments system.

In its advent to research and foster a real-time payments system in the country, the Bank of Israel sees a central bank-issued digital currency as an option for an effective and reliable infrastructure for immediate payments. For context, the Bank of Israel published a public consultation paper  [PDF] on November 15 that sought proposals for a payments infrastructure, either “centralized or distributed – that will support immediate payments in Israel.”

As Reuters  reports, an anonymous Bank of Israel source has now confirmed the central bank is examining the possibility of issuing a blockchain-powered cryptocurrency for a faster payments infrastructure.

While a faster payments system, akin to the likes of the UK and Singapore (as cited by the BOI paper) is a possibility, “a central bank-issued digital currency is another form of an advanced payments system which currently does not exist,” the anonymous central bank official said.

According to the unnamed source, a digital currency issued by the central bank would be ‘centralized, safe and abide by money laundering rules’ unlike decentralized cryptocurrencies like bitcoin.

The source further added:

Central banks around the world are examining (the use of digital currencies) so we should as well.

A digital currency would also help the Israeli government reduce the amount of physical cash in circulation with an estimated 22% of the country’s national output currently in the black economy.

A number of central banks around the world are actively researching and exploring the issuance of cryptocurrencies. The most notable of these efforts sees China’s endeavor establish a digital currency research institute this year after an early successful trial, made public this year, revealed the People’s Bank of China issue its own digital currency over a blockchain. In September one PBoC researcher urged the central bank to issue a digital currency “as soon as possible”. Elsewhere, a meeting between Russian president Vladimir Putin and Moscow’s political elite in mid-October resulted in Putin calling for a state-issued cryptocurrency, tentatively dubbed the ‘cryptoruble.’

Bank of Israel image from Shutterstock.