Israel Set to Pilot Digital Shekel (ILS) for Payment Innovations

• The Bank of Israel (BoI) is accelerating its efforts to develop its central bank digital currency (CBDC), known as the “digital shekel.”
• On May 28, the BoI announced plans for the CBDC’s payment use case through the ‘Digital Shekel Challenge’ experiment.
• BoI Deputy Governor Andrew Abir emphasized the importance of collaboration between the Bank of Israel, the private sector, and the government for the success of the digital shekel.

The Bank of Israel is launching the Digital Shekel Challenge to develop a collaborative CBDC payment system, inviting participation from private, public, and academic sectors.

Israel Digital Shekel Challenge Announced With the Aim of a Collaborative CBDC Development

As part of this challenge, Israel’s central bank will provide a sandbox environment and API layer, inviting private, public, and academic participants to build real-time CBDC payment systems for public use. The program will have three phases: applications/presentations, access to the new network for selected projects, and a final presentation to judges.

Public Consultations Reveal Support and Privacy Concerns

The Bank of Israel disclosed plans to launch interest-bearing CBDC in March 2024 after actively working on a potential digital shekel since late 2017. In November 2021, it sped up its research and preparation efforts for the possible issuance of a digital currency to create a more efficient payment system. In 2021, the central bank surveyed the public about its digital currency research. Most people supported the research, but others expressed privacy concerns.

Conclusion

The Bank of Israel’s Digital Shekel Challenge aims to foster collaboration and innovation in the development of a CBDC. By engaging various stakeholders, the BoI hopes to create a robust and efficient digital payment system while addressing public concerns about privacy and security. The success of the digital shekel will depend on transparent development and active participation from the financial industry and government.