Bank of Israel Planning to Inspect CBDC

Bank of Israel Planning to Inspect CBDC

Bitcoin News Blockchain
May 16, 2021 by Editor
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The Bank of Israel published a working paper on a central bank digital currency (CBDC) to serve as a starting point for debate. The bank stressed that it has not yet decided whether or not to launch a digital shekel. But is developing an action plan in case the benefits begin to outweigh the risks.
Bank of Israel Planning to Inspect CBDC

The Bank of Israel published a working paper on a central bank digital currency (CBDC) to serve as a starting point for debate.

The bank stressed that it has not yet decided whether or not to launch a digital shekel. But is developing an action plan in case the benefits begin to outweigh the risks.

Several central banks worldwide are increasingly interested in the subject, which appears to be the driving force behind the bank’s publication.

It includes a model of a possible CBDC similar to those that have been suggested around the world. A two-tier model will be used, with the central bank issuing a digital currency circulated by payment service providers.

The Central Bank’s digital shekel will always be a liability, and its core structures can be centralized or distributed ledger-based (DLT).

Payment providers can provide improved features, such as programmable money technology.

The idea of payment providers is one factor that is a little different. This includes, as one might expect, banks, credit card companies, and fintech. The bank, on the other hand, had a reference to Israeli or international technology firms.

While the latter may seem self-evident, other central banks have been wary of significant tech network effects, especially Facebook‘s role in Neoliberalism (formerly Libra).

There are potential economic risks, but maybe more significantly, the possibility of a big tech firm usurping the control of a central bank due to the sheer size.

The CBDC can not have complete privacy due to anti-money laundering (AML) regulations and the need to collect taxes. There would be “various degrees of privacy about payment providers and commercial organizations,” however.

Payment fees would be minimal, and people will pay even when they are not online. The digital currency will not pay interest at first, and the bank will set limits on how much money can be invested in it.

The digital shekel is expected to be able to be converted into another CBDC.

The Bank of Israel, like many other central banks, believes that the advantages of a CBDC can be achieved by improving existing payment systems.

Meanwhile, several CBDC projects are going forward around the world. Norway is one of the countries that has stated that it will begin experimenting with technical CDBC solutions.

Various private players in Korea, including Klaytn and Shinhan Bank, are positioning themselves to participate in a CBDC.

China’s digital yuan pilots are also expanding, adding new hardware options and moving closer to launch.

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