A Central Bank of Israel official said digital payments had “eroded” the role of cash.
Bank of Israel Deputy Governor Andrew Abir recently said that while traditional cash was once competitive with other payment methods, its role has been “weakened” by technological limitations as finance has become increasingly digital.
Abir made the remarks while speaking at the “Engine of the Israeli Ecosystem” conference on April 16, where he also announced a new sandbox for testing a central bank digital currency called the Digital Shekel.
The API-based sandbox allows financial institutions, fintech companies, and other participants to participate and develop use cases for the digital shekel.
catalyst for competition
Central bank officials said CBDCs have the potential to be a “credible catalyst” to increase financial competition among banks.
He said the digital shekel's versatility would allow it to compete with other digital payment methods that have ruled out traditional cash in recent years. CBDCs can be used in digital and e-commerce, performing roles that central bank-issued cash cannot.
The Digital Shekel will secondly encourage competition between external services built on the new platform. Participants can act as payment service providers or additional service providers, allowing competition between digital shekel-based services.
The sandbox will help the Bank of Israel understand how CBDC systems can be designed to support participant-generated use cases.
The digital shekel has not been confirmed.
Despite positive statements and developments related to CBDC, the Bank of Israel is not confident that it will create or issue a digital shekel as of April 2024.
The bank's webpage now states that after considering potential costs and risks, “an action plan will be prepared that can be implemented in the future if conditions warrant.”
Despite the reservations, the Bank of Israel has undertaken several initiatives related to the digital shekel. Last March, the bank discussed the logical architecture of the digital shekel based on the results of an experiment called “Project Sela”.
In an initial experiment called “Project Icebreaker,” the bank investigated using retail CBDCs for cross-border payments.
Central Bank of Israel official says digital payments have 'eroded' the role of cash appeared first on CryptoSlate