A team under the Bank of Israel has released a report on the proposal to launch a national cryptocurrency. The group, which was formed last November, has outlined various potential benefits to the technology but has told the central bank not to act until other institutions worldwide have done so.
The 40-page document primarily details the advantages of releasing an “e-shekel” from the Bank of Israel’s standpoint. These considerations include providing public access to the central bank’s liquidity when the use of physical cash ever dwindled significantly. Another would be to support local payments system and make them more efficient. The group also found that “if it bears interest,” the e-shekel could be a monetary tool controlled by the central bank.
The report suggests that e-shekel issuance could help fight the “shadow economy,” therefore making it more difficult for individuals to conduct unreported financial transactions. On the other hand, the authors of the report also discovered some disadvantages, including the fear that people might assume that the move was merely a “big brother” attempt to continue surveillance on Israeli citizens.
The team has also identified concerns such as digital coins being inaccessible to technologically challenged individuals. The possible e-shekel technical failure could also affect the central bank’s reputation badly.
Unlike the dynamic, tech-focused Israeli private sector, the nation’s public institutions are highly conservative and often hesitant to embrace new technologies. With that, it is not surprising that the Bank of Israel has taken a wait-and-see approach to cryptocurrency despite its perceived advantages.
“No central bank in an advanced economy has yet issued digital currency for broad use,” the group concluded, acknowledging that numerous institutions worldwide have already explored the possibility. It seems that the Israeli central bankers will not take a step forward unless another leading institution like the European Central Bank or the US Federal Reserve does so first.
Nevertheless, it is still possible as the same group will continue monitoring the developments in the industry, “particularly at other central banks.” They also intend to report their findings to the management of the Bank of Israel on a semi-annual basis. They also recommended discussing the matter with institutional bodies like the International Monetary Fund, the Organization for Economic Cooperation and Development, and the Bank for International Settlements.