Palestine Exploring the Possibility of a Digital Currency

The Palestine Monetary Authority (PMA), is reportedly researching the feasibility of creating a digital currency, which could be a possible strategy that would give Palestine some form of financial independence. 

A Digital Currency to Break Free from Israel’s Control?

According to Bloomberg on Thursday (June 24, 2021), the PMA Governor Feras Milhem made the revelation in an interview with the new publication. Milhem stated that the PMA was conducting two studies on cryptocurrency.

Also, Palestine is working in collaboration with China and Sweden, which are both progressing with their central bank digital currency projects, to explore the prospects of issuing a sovereign digital currency. 

While the PMA Governor said that the financial institution is yet to make any decision, Milhem believed that the existence of a national digital currency will be used “for payment systems in our country and hopefully with Israel and others to use for actual payments.” 

The Protocol on Economic Relations signed between Israel and Palestine in April 1994 saw the formation of the PMA. However, while the PMA had powers to regulate and implement monetary policies like a central bank, it could not issue a currency. 

Also, the terms of the agreement revealed that the New Israel Shekel (NIS) will serve as a payment means in Palestine and be accepted by all banks, local authorities, and institutions. The agreement effectively gave Israel monetary and economic control over Palestine. 

The Israeli government also imposed severe restrictions on the movement of people and goods to and from Gaza, which has crippled the region’s economy.

Furthermore, Israel’s law bans transactions involving large cash and also limits the number of shekels that Palestine banks can transfer into Israel every month. 

Consequently, the unfavorable economic condition experienced in Palestine as a result of Israel’s influence could be a reason Palestine is considering issuing a digital currency.  

Palestinian Digital Currency Idea May Not be Possible

It is not the first time, however, that Palestine has considered crypto. As previously reported by BTCManager back in May 2017, the PMA Governor at the time, Azzam Shawwa, said that the financial institution was looking at creating an e-pound, or adopting bitcoin to break out of Israel’s interference. 

However, some experts believe that Palestine’s proposed plan for a digital currency might not be possible. One of such persons was the director of the Palestine Economic Policy Research Institute, Raja Khalidi, who said:

“The macroeconomic conditions don’t exist to allow a Palestinian currency — digital or otherwise — to exist as a means of exchange.”

Another person was the former adviser to the governor of the Bank of Israel, Barry Topf, who said that a digital currency from Palestine will not serve as a means of exchange. Topf added that the Palestinian digital currency will not “replace the shekel or the dinar or the dollar. It’s certainly not going to be a store of value or a unit of accounting.”