The Bank of Israel has issued digital currency for a first internal pilot program prior to the possibility of issuing a digital shekel. Bank of Israel deputy governor Andrew Abir inadvertently revealed this during a meeting two weeks ago to examine the need for a digital shekel and its implications for the financial sector, Globes reports.
The meeting heard that digital currency would have dramatic implications not only for the payments market but also the entire financial market including the cryptocurrencies and blockchain sector and the banking system. Abir spoke in response to criticism that a call for proposals was published by the Bank of Israel when the possible issuing of a digital shekel by the Bank of Israel was only theoretical.
"Part of the enthusiasm of people outside of the bank to our report on the digital shekel stemmed from the hope that the digital currency would eliminate the banks. I'm sorry to tell you but this is not going to eliminate the banks, no central bank would bring in a digital currency with such an aim. The banks are still an important part of any payments system that there will be. The second thing that will perhaps disappoint you is that the digital currency of a central bank won't come to protect bitcoin. What we are talking about is a payments system. Bitcoin is not a payment system and is not a currency - in the best case scenario it is a financial asset, and in the less good scenario it is a pyramid fraud,” Abir said.
On the war against money laundering, Abir said, "The digital shekel won't be a reason why people stop using cash if they want to evade taxes. Whoever wants to evade tax will do so regardless of whether there is a central bank digital currency (CBDC) or not, because he wouldn't use it. There are other ways to deal with the entire issue of black capital and crime and the CBDC is not the answer to this."
Abir stressed that there is a need to upgrade the payments system in Israel, which is a decade behind other countries, especially Europe, but also some of the emerging markets. "I don't know if the CBDC will happen in the next five years. When the Governor put me at the head of the committee to examine the CBDC, which was a bit of a strange choice because I'm a traditional financial markets person, and not exactly in this new field, I estimated that the chances that there would be CBDC in five years was 20%. It's risen a little over the past year, mainly because of other countries also focusing on it but there is still less than a 50% chance."
