Israel has announced that it will accelerate the development of its central bank digital currency (CBDC), the digital Shekel. The Bank of Israel (BoI) will involve several service providers in the joint development of an advanced digital payments ecosystem focused on the digital Shekel.

‘Digital Shekel Challenge’ initiative has been launched

The BoI has launched the ‘Digital Shekel Challenge’ initiative, inspired by the BIS Innovation Hub’s ‘Project Rosalind’. Project Rosalind is a joint experiment between the Bank for International Settlements (BIS) and the Bank of England, with the aim of developing prototypes for an application programming interface.

As part of the challenge, the BoI will provide a sandbox environment linked to a layer of APIs. Participants will compete to build real-time CBDC payment systems for the general public.

Shauli Rejwan, managing partner at Masterkey Venture Capital, explained that the program consists of three phases: registration and presentations, access to the new network for selected projects, and a final presentation to a jury, some of whose members have spoken at recent crypto events .

Bridging the gap between Web3 industry and government

Rejwan believes the initiative could bridge the gap between the Web3 industry and government, even though decentralized finance and permissionless solutions are not yet being considered.

Israel has invited entities from the private, public and academic sectors to participate in the experiment. The central bank emphasized that priority will be given to applications with original and innovative features in the payment world, whether they are improvements to existing applications or completely new applications. Participants also get to build solutions for unique niches and scenarios.

Competition between CBDCs and banks is good for the economy

On April 16, BoI Deputy Governor Andrew Abir stated that competition between CBDCs and banks is good for the country’s economy. He believes that the development of a digital Shekel will receive public support, emphasizing that the digital Shekel will not be anonymous like Bitcoin, but will be developed and managed by the well-known and trusted Bank of Israel.

Abir added that the ability to hold digital Shekels could encourage banks to pay higher interest rates, which would also benefit the BoI.

A May 11 public consultation report confirmed public support for the development of the CBDC. However, respondents unanimously expressed concerns about potential privacy breaches by the CBDC.


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