The Bank of Israel is testing its central bank digital currency, the digital shekel, in a private permissioned ecosystem using Ethereum, according to Globes, a Hebrew-language financial newspaper based in Tel Aviv.
Fast facts:
- In May, the Bank of Israel published a report calling for public comment on the potential issuance of a digital shekel. The bank, which says it has been considering the issue of CBDCs since 2017, wrote that it had “not yet decided whether it intends to issue a digital shekel, but in view of the rapid developments in the digital economy and in payments, and in view of the major central banks’ work on the issue, the Bank of Israel is accelerating its research and preparation for the potential issuance of a digital shekel.”
- Monica Singer, South African lead for blockchain software company Consensys, told Forkast.News: “Many central banks that are testing the possible implementation of CBDCs are doing so in a private, permission ecosystem, and many of them are using Ethereum.” Ethereum is a decentralized, open-source blockchain with smart-contract functionality.
- The concept of programmable money is the most important concept, Singer said. “The smart contract will allow the central bank to stipulate the level of CBDC transactions where privacy will be allowed and above a certain amount then privacy cannot be allowed to prevent money laundering, for example. You can program that taxes be paid in real time. In countries where the treasury proposes to distribute social grants, government pension funds or universal basic income to its citizens, this will be done in real time to the wallets of the citizens. No need for checks or standing outside a bank branch to get paid out.”
- The Bank for International Settlements — the bank for central banks — has come out in full support of CBDCs, saying they “herald a new chapter for the monetary system” in its annual economic report, released this week. According to a recent BIS survey of central banks, 86% were actively researching CBDCs, 60% were experimenting with the technology and 14% were deploying pilot projects. In Asia, China is the farthest ahead in CBDC development, with Hong Kong, Japan, South Korea, Singapore and Thailand also exploring the wholesale and retail uses of CBDCs.