Israel's Digital Shekel Plans Hinge on ECB's Digital Currency Move

The Bank of Israel (BOI) is exploring a central bank digital currency (CBDC), a digital shekel, to modernize Israel’s payment system and drive innovation. However, BOI Deputy Governor Andrew Abir stated that the BOI is waiting for a major central bank, likely the European Central Bank (ECB), to introduce a digital currency before proceeding. This cautious approach reflects a broader trend, as 134 countries, representing 98% of the global economy, are exploring digital currencies. While the BOI has intensified its efforts since 2020 and launched the “Digital Shekel Challenge,” it remains uncertain about the digital shekel’s future. Approval from finance and justice ministries is necessary, and public adoption remains a significant concern. Despite these challenges, a digital shekel promises to revolutionize payment systems by creating competition with bank deposits and leveling the playing field for payment providers in Israel’s highly concentrated banking sector.