Israel Plans to Launch Interest-Bearing CBDC – Here’s What You Need to Know
Israel’s Central Bank unveiled plans on March 11 to launch an interest-bearing Central Bank Digital Currency (CBDC), dubbed the “digital shekel”.
In a recent document, the Bank of Israel (BoI) outlined its proposal for the ‘digital shekel,’ highlighting key features such as wallet provision and bank payment services.
The CBDC’s two-tier model will enable round-the-clock payments, offline use, quick payments, and multipayment support with balance caps in place.
Despite ongoing debates and uncertainties within the bank, the BoI has set a deadline of December 2024 for publishing a design document.
Israel wants to launch a digital shekel with built-in deposits
The functions will be the same as in all announced CBDCs: instant cheap payments, programmability, transparency.
In addition, embedded deposits for individuals and a liquidity buffer function for financial… pic.twitter.com/li550AfpaB
— Crypto 4 Light (@vladi4light) March 12, 2024
Privacy concerns have also been addressed, with the BoI assuring that users’ transaction balances and personal information will not be compromised. It added that the Central Bank will specify the required data for effective operation, monitoring, and control.
Currently, Israeli commercial banks pay 4.86% interest on customers’ fiat shekel savings and deposits.
Under the plans for the digital shekel, commercial banks are exempt from interest if they add the CBDC to their short-term liquidity reserves. This move is aimed at encouraging the adoption of the digital shekel.
The BoI has been considering a digital shekel since 2021, even though pilot tests have yet to commence.
Last year, the BoI believed an upsurge in stablecoin usage would finally usher in a digital shekel. However, at the time, it was
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