Israeli central bank official, Andrew Abir, sees the introduction of the digital shekel as a catalyst for technological advancements that will drive competition in the banking sector. He acknowledges the ongoing efforts to increase competition in the Israeli banking industry and states that there is still a long way to go. Abir notes that public sentiment towards commercial banks in Israel is not always favorable, and part of the discontent 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 for paying interest. Abir assures the public that the digital shekel will be developed by the Bank of Israel, a trusted institution that stands behind the traditional cash system. He emphasizes that the digital shekel will not be created by an anonymous entity like Satoshi Nakamoto, the pseudonymous creator of Bitcoin, but rather by a transparent and accountable central bank.
Abir highlights the advantages of introducing a digital shekel for the Bank of Israel as well. It would provide the central bank with greater accessibility to central bank money, facilitating its use in digital payments. This would counteract the declining trend in central bank money usage resulting from advancements in the private sector. Additionally, the digital shekel could incentivize commercial banks to offer higher interest rates to customers, as the option to hold digital shekels would increase competition.
The digital shekel has garnered strong support among the Israeli public, indicating a positive reception for the potential benefits it offers. The introduction of a CBDC like the digital shekel is seen as a step towards enhancing competition in the financial system, driving innovation, and ultimately benefiting the Israeli economy.
As the Bank of Israel continues to develop the digital shekel, it aims to create a trusted and efficient digital currency that aligns with 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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