Israel’s Central Bank to hold off CBDC decision ahead of EU’s call on digital Euro

The Bank of Israel suspended its decision to introduce Central Bank Digital Currency until the European Union clarified its position on the digital Euro. Deputy Governor Andrew Abir stated that they were waiting for the European Central Bank to pull the trigger. He added that the ECB’s acceptance of the CBDC would then prompt adoption in other countries.

Also read: Bank of Israel Launches Digital Shekel Challenge 

Andrew Abir, the Bank of Israel’s Deputy Governor, has clarified that the Bank of Israel will not decide to launch a Central Bank Digital Currency within the country before the European Central Bank makes a move. Israel’s central Bank announced in June that it was launching a Digital Shekel Challenge as a step towards the adoption of a CBDC within the jurisdiction.

Israel awaits the European Central Bank’s clarification

The deputy governor of the Bank of Israel has stated that the decision to introduce a digital currency into the state’s financial ecosystem is dependent on the move taken by the European Union. Andrew Abir stated that most other countries are also waiting for a Western central bank to pull the trigger. He specified that most countries are monitoring the European Central Bank’s decisions on a digital Euro before making a decision.

We’re all waiting for the first Western central bank to pull the trigger which is almost certainly going to be the ECB. And then you may see a rush of countries going forward with it.” 

Andrew Abir

The governor also mentioned that public adoption is the big question. He highlighted that it is a big leap from studying the CBDC use cases to convincing citizens to adopt the currency. He emphasized the necessity of having well-established use cases before launching a CBDC.

As of May 2024, close to 134 countries have reportedly shown particular interest in CBDCs. Last year, the European Union announced that proposed legislation for a digital currency had been put in place. The EU officials added that working on a digital currency does not translate into a commitment to launch one. 

Bank of Israel launches the digital shekel challenge

Israel announced in May that it would conduct a behavioral study on the adoption of a digital shekel. The bank stated that the challenge was inviting different sectors to make applications for a potential CBDC. 

The simulation aimed to test the digital currency utilizing its core system and API layer. Abir stated that a digital shekel challenge is a step towards the adoption of CBDC as a means of payment in the near future. He stated that the success of a digital shekel would depend on various stakeholders, such as the Bank of Israel, the private sector, and the government.

Abir also added that the Central Bank intended for the CBDC to level the playing field for payment providers. He said equal opportunities could enable the providers to compete with lenders. Abir praised the mechanism, stating it allowed lower capital requirements and supervision compared to traditional payment systems.

Cryptopolitan reporting by Collins J. Okoth