Israel is joining the global cryptocurrency race. More than 50 monetary authorities around the world are looking into the use of digital currencies. The Bahamas have already launched a digital currency, China has started a pilot for an electronic yuan and the European Union hopes to launch a virtual euro by 2025. The United Kingdom has established a task force and the United States, the world’s financial hegemon, is inspecting ways to create an e-dollar. On May 20, Federal Reserve Chairman Jerome Powell announced the agency was ramping up efforts to develop a digital dollar.
On May 11, the Bank of Israel presented the model it recommends for the digital shekel. According to this model, the digital shekel will be issued by the central bank, and transferred to payment service providers (banks, credit card companies and fintech structures). These in turn will provide the public with the digital coins.
It is important to note that according to the Israeli model, these payment service providers will operate as channels to transfer the digital coins to clients. They will not be allowed to make loans in digital coins or use them in any other way. This should protect the Israeli digital coin reserve, in case one of these institutions fails, technologically or otherwise.
On the side of the clients, they could use the digital coins for purchasing products and services and for online transfer of funds.
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