The Bank of Israel has joined hands with the Hong Kong Monetary Authority to test a new central bank digital currency (CBDC), Bloomberg News reported on June 16.
The project is scheduled to start in Q3, the publication reported, citing the Bank of Israel. The initiative will be based on a two-tier CBDC issued by the central bank. Financial intermediaries like banks will be in charge of distributing the digital currency.
The CBDC’s design will reportedly allow intermediaries to use it without exposing their customers financially. Banks involved in the project will be required to test whether the above feature makes the CBDC less susceptible to cyber-attacks.
Citing the Bank of Israel, Bloomberg reported that the design of the CBDC is deemed to be exposure-free and is expected to minimize the financial risk for customers. Additionally, the central bank projects the digital currency will feature high liquidity, low costs, increased competition, and broader access.
Bloomberg reported that the Innovation Unit of the Bank of International Settlements (BIS) would also participate in the project.
Bank of Israel is yet to decide on a digital shekel
This news comes as the Bank of Israel continues to stall when issuing a CBDC.
In the past month, the central bank revealed that it has already received the public go-ahead to issue a digital shekel. The Bank of Israel got 33 responses to its request for public opinions on the matter. Out of the 33 responses, 17 were from the fintech sector.
Notably, all responses favored the issuance of a CBDC. According to public opinion, a digital shekel can help bolster the economy by minimizing cash usage and improving financial technology.
However, the central bank is yet to announce whether it will pursue the idea or not. It has been said the public has varying opinions regarding the privacy of the digital shekel.
The bank – exploring the CBDC concept since 2017 – said it has yet to decide whether to implement or launch a digital shekel. The Bank of Israel only promised to continue holding talks about the CBDC with stakeholders.
Meanwhile, the People’s Bank of China (PBoC) is inching closer to rolling out its digital yuan after launching trial versions of the digital yuan wallet earlier this year. The country is yet to announce the official launch date of its CBDC. Thus far, only Nigeria and the Bahamas have launched CBDCs, according to CBDC Tracker.
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Author: Jinia Shawdagor