Israel unveils preliminary digital shekel design

The Bank of Israel has released a preliminary design for the digital shekel, a potential central bank digital currency (CBDC), outlining its ecosystem, technical framework, and regulatory considerations.

Despite no definitive plan for its launch, the proposal highlights several motivations for issuing a digital shekel, including creating an alternative payment system, reducing costs, enhancing privacy, and combating the "black economy."

The digital shekel is envisioned as a multipurpose CBDC, catering to both retail and wholesale users, and would be available to the entire public, including children, foreigners, businesses, and financial entities.

Key features include offline functionality, interoperability with other payment systems, and instant settlements.

Private firms will play a crucial role in user onboarding, deposit conversion, and providing advanced financial services, with the Bank of Israel as the sole issuer of the CBDC.

The central bank is seeking public feedback until April 30, 2025, and will issue requests for information to technology providers to gather implementation ideas.

Yoav Soffer, the digital shekel project manager, emphasised that while no decision has been made on issuing a CBDC, it is important to prepare and deepen understanding of the digital shekel system with the ecosystem.

The final decision on launching an Israeli CBDC will be made after 2026, based on research, public feedback, and regulatory considerations.

The Bank of Israel has been exploring a digital shekel since 2017, with renewed efforts in 2021 focusing on public consultations and technical trials.