More than 60 countries say they are researching or implementing digital currencies of their central banks (CBDCs). Among them is Israel, which recently announced that it has adopted Ethereum technology to conduct a pilot program for its digital Shekel.
CBDC an opportunity for Israel
The idea of creating a digital shekel originated back in 2017. As the deputy governor of the Central Bank of Israel points out, he estimated then that the chances of introducing CBDC in the next 5 years are 20%. Today, it is already around 50%. Andrew Abir also pointed out that Israel’s payment system is one of the outdated ones. Other countries are a decade ahead of it. However, the development of contactless payment technologies as well as the influx of digital wallets are bridging this gap. Additionally, the implementation of a digital shekel may accelerate this process.
As Andrew Abir justifies, Ethereum was chosen for the pilot program because it is the first network in blockchain technology, capable of operations based on smart contracts and enabling the creation of new currencies at the same time. He noted, however, that a final decision on the operation of the digital shekel has not yet been made.
Abir, quoted by Bloomberg among others, also referred to the issue of Bitcoin and hypothesized that the CBDC is a way to secure the country from its influx. He pointed out that CBDC has nothing to do with the king of cryptocurrencies and no central bank, by issuing digital currency, aims to limit Bitcoin. According to him, BTC is not a payment system or a currency and therefore does not pose a major threat to global finance.
Central banks are increasingly looking towards digital currencies
The principles of CBDCs are similar to blockchain, as a distributed ledger. However, they are somewhat different ventures than the cryptocurrencies we have known so far. Currently, some of the most advanced work is taking place in China. Interestingly, at the same time, Bitcoin is being pushed out of China, which may give the impression that CBDC is in competition with the largest cryptocurrency and, consequently, even the entire market.
Exploratory work within the CBDC is also being carried out by the European Central Bank. However, the declarations of the representatives indicate that a few more years are needed for the technology to be fully adopted. Despite the fact that in the context of CBDC several dozen countries have already made positive statements, the most transparent seems to be Ukraine, which at the beginning of the year announced that it is working with blockchain Stellar to create this kind of solution for the needs of its own banking.