Israel Plans To Launch Digital Shekel, New CBDC Prioritizing Privacy

Bank Israel plans to launch a CBDC, a Digital Shekel, which prioritizes privacy. (Photo; Doc. Haaretz)

JAKARTA - The Israeli bank recently announced its ambitious plans to launch the Central Bank Digital Currecies (CBDC) known as the "Digital Shekel". In an announcement on March 11, the Bank of Israel introduced its vision for currencies that not only utilize the latest financial technology but also offer flowering features.

Digital Shekel is designed to operate in a two-tiered model, promising 24-7 available instant transactions, supporting multiple payments, and offline functionality. The most prominent feature is its ability to generate interest, making it an attractive asset for consumers and investors.

In addition, privacy is a top priority in the Digital Shekel architecture, where Bank Israel is committed to limiting its access to user transaction data. This reflects efforts to balance between bank transparency and user privacy.

While commercial banks in Israel currently offer interest rates of around 4.86% for depositing fiat shells, Digital Shekel will allow banks to include them in short-term interest-free liquidity. The proposed CBDC data structure will support ownership restrictions and applied interest that are tailored to user type and balance size.

Israel has considered the issuance of digital shekels since 2021, until now there has been no trial conducted by them. Even so, Bank Israel's latest efforts indicate the acceleration of Digital Shekel development. Digital Shekel is expected to have a significant impact on the Israeli economy. This CBDC is able to execute transactions more quickly and efficiently. This advantage has the potential to increase business productivity and reduce transaction costs.