Andrew Abir, the Deputy Governor of the Bank of Israel, has started to issue digital shekels as the first step of an internal CBDC pilot program. Internationally this is nothing new, the majority of central banks have started experimenting with digital currencies.
The idea of the digital shekel has been kicked around since 2017 but Israel decided to put the development of its central bank digital currency (CBDC) into high gear. As reported by The Jerusalem Post, the pilot test was announced by Andrew Abir at a conference of the Fair Value Forum of IDC Herzliya. According to Bloomberg, the program ran on the Ethereum blockchain.
The digital shekel
During his speech, Abir stated that the Bank of Israel had already run a digital currency pilot, much to the surprise of everyone in attendance. The report suggests that this was an unintentional reveal by the bank’s Deputy Governor when discussing the need for a digital shekel and its possible effects on the financial sector.
Despite the accidental announcement about the test run, Abir clarified that he was not sold on the idea of a digital shekel. “I had previously estimated that the chance of having a CBDC within five years is 20%.” Abir did say that he was feeling more optimistic than before, with his estimate going up since the previous year due to other countries moving forward. However, he states, that there is still less than a 50% chance.
Other countries testing CBDCs
Reports by the Bank of International Settlements (BIS) suggest that 80% of the world’s central banks are considering central bank digital currencies (CBDCs) on some level. While many are still in the pre-planning stages, a few have separated themselves from the pack and have moved to the testing stage.
Sweden has already conducted a number of testing phases on its digital currency, the e-krona. Tests were conducted to determine how real-world payments would incorporate the CBDC. The currency testing phase concerns commercial banks and is set to evaluate how the e-krona could be utilized for both retail and commercial payments.
China has also been running tests since last year in a number of provinces nationwide. The Chinese government has doled out millions of dollars in digital yuan to citizens in Chengdu, Suzhou and Beijing. The next step for the Peoples Bank of China is to test the digital yuan for cross-border transactions, similar to projects between the Swiss National Bank (SNB) and Banque de France.