The Bank of Israel made it clear that it’s in no hurry to launch its digital shekel, opting to wait and observe the developments of the digital euro first.

Israel‘s central bank is waiting for Europe’s central bank “to pull the trigger” before making its own decisions on whether it should give the digital shekel the green light.

In an interview with Reuters, Bank of Israel deputy governor Andrew Abir said the country wants to see how things will unfold for the European Central Bank, which is mulling a decision to issue a digital euro by 2027.

“The big question is whether the public will adopt a digital currency,” Abir said, adding that there’s a “big jump from some study to persuading people to use it.” The Bank of Israel initiated exploratory research on the digital shekel back in 2017, examining the potential benefits and challenges associated with issuing a central bank digital currency (CBDC).

The preliminary phase focused on understanding global trends in digital currencies, technological feasibility, and the potential impact on monetary policy and financial stability. In 2021, the Bank of Israel accelerated its efforts, establishing a dedicated task force to further investigate and develop the digital shekel.

In late May, the Bank of Israel launched the Digital Shekel Challenge, inviting diverse sectors to create applications for a potential central bank digital currency. The pilot aims to test the digital currency using a technological prototype that simulates the core system of the digital shekel and its API layer.

Abir says the central bank wants CBDC to create a “level playing field for payment providers” so that a digital currency could allow these providers to compete with financial lenders. “An advantage of a CBDC is that the payment provider does not hold your money so you don’t (have) a credit exposure to that company,” Abir said, adding that this mechanism “allows a lower level of supervision and capital requirement than a traditional payments provider.”