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In Israel, the peer-to-peer protocol Kima has successfully initiated the transfer of a tokenized share via Central Bank Digital Currency (CBDC). The initiative launched by the Bank of Israel aimed to find a potential use case for the adoption of the digital shekel.
Summary
Israel and the successful use case of Kima for the adoption of the CBDC
According to what is reported, the peer-to-peer protocol of Kima has successfully implemented a use case for the adoption of the Central Bank Digital Currency (CBDC). This initiative was launched directly by the Bank of Israel.
In practice, it seems that Kima has successfully facilitated the transfer of a tokenized stock via digital shekels.
Specifically, the purchase of a tokenized stock using the digital shekel was then converted into fiat shekel to finalize the process, using Kima’s settlement layer.
Kima is a peer-to-peer money transfer and payment protocol independent of assets. To demonstrate the utility of its protocol, Kima built an imaginary trading platform called PeerTrade that facilitated an atomic swap of tokenized shares.
By doing so, Kima orchestrated the transaction in place of an intermediary, connecting the buyer who used their CBDC to purchase the share from the seller who held the tokenized share in their wallet. The seller then received the payment in their bank account in the form of shekel in fiat currency.
During the entire process, Kima’s technology ensured that the transaction was secure and verified. The process took place instantly, while Kima’s blockchain functioned as a decentralized deposit without intermediaries or smart contracts, additional fees, delays, or unforeseen events.
Israel and the use cases for adopting the CBDC
In the specific case of Kima, the protocol includes a Universal Payment Rail (UPR) and a Liquidity Cloud. These are technologies that connect fiat and digital assets across multiple blockchains, allowing transactions to occur without being tied to a specific currency or payment rate.
Kima manages its applications on a wide range: cross-border money transfers, hybrid payments, tokenized asset transactions in the real world, gambling, e-commerce, and DeFi.
Regarding the use case of Israel’s CBDC, Eitan Katz, CEO of Kima commented:
“Today’s financial systems are burdened by barriers and intermediaries that slow down transactions and add unnecessary costs. For the first time, our solution has enabled an unprecedented efficient transaction, executing real-time delivery and payment without intermediaries or smart contracts. After securely exchanging the assets, the system seamlessly executed an off-ramp action within the same atomic transaction, marking the first time a decentralized chain has facilitated a transaction that integrates both digital and fiat currencies. The flexibility of this protocol allows citizens and financial institutions to conduct smooth, cross-asset, and cross-currency transactions without the need for complex conversions or restrictions on the type of asset.”
In any case, the Bank of Israel has not yet decided to issue its CBDC. In fact, what it is doing is preparing an action plan that can be implemented in the future if the conditions justify it.
The Bank of Israel stated that a future decision to issue a digital shekel will be based in part on the assessment that the benefits of issuance outweigh the potential costs and risks associated with such issuance.
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Pilot project
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Already in October 2021, in Israel there was talk of CBDC, after the Bank of Israel had announced its pilot project for the digital shekel.
From what had emerged, it seems that the blockchain that was chosen to conduct tests on the new CBDC was indeed Ethereum. In this sense, however, Yoav Soffer, CBDC Project Manager at the Bank of Israel, had stated that it was not the blockchain of choice but just the one they wanted to test on.
At that moment, the bank wanted to speed up the process on digital currencies precisely because there was an increase in the use of digital payments, due to the pandemic period.