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Despite the pilot, the central bank’s deputy governor expressed reservations about establishing a full-fledged CBDC in Israel, calling Bitcoin a “pyramid scam.”
According to reports, the Bank of Israel has already issued a central bank digital money, the digital shekel, in a pilot test.
According to a Monday report from the Jerusalem Post, Bank of Israel deputy governor, Andrew Abir, said the financial institution had started to conduct a pilot program for a digital shekel. Speaking at a conference of the Fair Value Forum of IDC Herzliya, Abir added that he was not optimistic about the bank issuing a central bank digital currency, or CBDC, despite the fact he confirmed a pilot test was underway.
“I had previously estimated that the chance of having a CBDC within five years is 20%,” said Abir. “My estimate has increased a bit in the last year, mainly because other countries are advancing with it too, but still there is less than a 50% chance.”
At the time of publishing, the Bank of Israel has made no formal announcement on the release of a digital shekel on its website. Last month, the financial institution stated that it was drafting an action plan to investigate the advantages of a CBDC on the Israeli economy, adding that it would be willing to do so if the benefits “outweigh the costs and potential risks.”
At the time, the central bank stated that if a CBDC fits the demands of the future digital economy and allows for more efficient cross-border payments, it may consider issuing one. The Bank of Israel also aims to minimise the usage of cash and provide the public with “a certain level of privacy.” when making payments.
“The option for a CBDC is still being considered, and when we made our statement last month, it was not to say what we are doing, but rather to share what we don’t know and solicit public feedback,” said the deputy governor. He went on to say that even if a digital shekel is introduced, the country’s banks “will continue to play an important role in the overall payment system.”
Despite his apparent desire to ultimately integrate a CBDC into the country’s economy, Abir attacked Bitcoin (BTC) as a payment method:
“What we are talking about is a payment system. Bitcoin is not a payment system, and it is not a currency. In the best situation, it is a financial asset, and in the worst case, it is a pyramid scam.”
The creation of an interdepartmental committee tasked with investigating the adoption of a CBDC by Israel’s central bank began four years ago. In 2018, the team advised against the Bank of Israel creating a digital currency, stating that “no advanced economy has yet issued digital currency for broad use.”