Israel Central Bank officials embrace competition between banks and CBDCs to boost economic growth

Central Bank of Israel official Andrew Abir sees the introduction of the digital shekel as a catalyst for technological advancements that will boost competition in the banking sector. He acknowledged ongoing efforts to increase competition in the Israeli banking industry and said there was still a long way to go. Abir notes that public sentiment toward commercial banks in Israel is not always favorable, and that some of the dissatisfaction stems from the need to improve competition in certain segments of the industry.

The digital shekel, currently in the planning stages, is designed to include an option to pay interest. Abir assured the public that the digital shekel will be developed by the Bank of Israel, a trusted institution that underpins the traditional cash system. He emphasizes that the digital shekel will not be created by anonymous entities such as: Satoshi NakamotoNot by the pseudonymous creators of Bitcoin, but by transparent and accountable central banks.

Abir also highlights the benefits of introducing the digital shekel for Israeli banks. This will encourage central banks’ use of digital payments by giving them easier access to central bank funds. This could counter the downward trend in the use of central bank funds due to developments in the private sector. Digital shekels may also encourage commercial banks to offer higher interest rates to their customers, as the option to hold digital shekels increases competition.

The digital shekel has gained strong support among the Israeli public, indicating a positive response to the potential benefits it offers. The introduction of a CBDC, such as the digital shekel, is seen as a step that will enhance competition in the financial system, drive innovation, and ultimately benefit the Israeli economy.

As the Bank of Israel continues to develop the Digital Shekel, it aims to create a reliable and efficient digital currency that serves the country’s financial goals. With the support of central bank officials like Andrew Abir, the digital shekel has the potential to revolutionize the Israeli banking industry and pave the way for a more competitive and technologically advanced financial system.

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