Israel starts digital shekel pilot
The Bank of Israel is launching the so-called Digital Shekel Challenge, inviting diverse sectors to develop applications for a potential central bank digital currency.
The Bank of Israel is moving forward with its digital currency also known as the digital shekel this time announcing the “Digital Shekel Challenge,” an initiative aimed at exploring the potential development and applications of a central bank digital currency (CBDC).
According to a press release shared with crypto.news, the Bank of Israel wants to test the digital currency through a technological prototype that simulates the core system of the digital shekel and its API layer. The prototype allows payment service providers and other stakeholders to access the system and develop services for the public, offering news payment options with the digital shekel.
“The success of the digital shekel will rely on collaboration between the Bank of Israel, the private sector, and the government. Through this challenge, we are allowing the financial industry from both Israel and abroad, as well as a broad range of payment stakeholders, to practically engage with us in the thinking, planning, and design of the digital shekel.”
Andrew Abir, deputy governor of the Bank of Israel.
Participants of the pilot will be tasked with developing various use cases for the digital shekel, utilizing the API layer. The central bank says the priority will be given to “original and innovative” payment applications, whether they enhance existing systems or introduce entirely new solutions.
Shauli Rejwan, the founder and managing partner of crypto investment fund Masterkey VC, says the Bank of Israel will likely focus on solutions that leverage micropayments, digital trusts and data products. He also added that the program would consist of three phases: application and presentations, access to the new network for selected projects, and a final presentation to judges, “some of whom have spoken at recent crypto events.”
“This initiative is a significant step for the Israeli ecosystem, potentially bridging the gap between the web3 industry and government, even though defi [decentralized finance] and permissionless solutions are not yet being considered.”
Shauli Rejwan
The Bank of Israel initiated exploratory research on the digital shekel back in 2017, examining the potential benefits and challenges associated with issuing a CBDC. The preliminary phase focused on understanding global trends in digital currencies, technological feasibility, and the potential impact on monetary policy and financial stability. In 2021, the Bank of Israel accelerated its efforts, establishing a dedicated task force to further investigate and develop the digital shekel.
