On Monday, the Bank of Israel (BOI) released a document outlining the potential scenarios supporting a decision to issue a digital shekel. A positive decision by the US or EU to issue a central bank digital currency (CBDC) would likely encourage Israel to follow suit, as would a situation where the use of cash declined significantly.
Although the BOI has not yet decided on CBDC issuance, it has debated the circumstances that would enable or support a positive decision. The Bank has identified five factors that could influence a decision on issuing a digital shekel.
First and foremost would be a decision on CBDC issuance by other countries, particularly by the US or EU. Most of Israel’s trade and capital flows are denominated in dollars or euros, so a CBDC that enabled international payments with these economies could significantly improve efficiency. Similarly, if enough countries decided to move ahead and issue a CBDC, this could potentially “tip the scales” and force Israel to “fall in line”. Israel is known for its tech prowess and wants to avoid being a laggard.
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