The Bank of Israel’s experts did not see significant risks from the CBDC rollout.
The Central Bank of Israel has reported the results of a study of the digital shekel, designated by the acronym SHAKED. As conceived by the developers, the digital shekel should become an alternative rather than a complete substitute for traditional money. In this case, the CBDC should not significantly impact the economic balance and the banking system.
The authors of the report also describe possible risks, including the impact on the structure and volume of bank lending to the public in the case of the transfer of a significant portion of deposits into the digital currency. This, in turn, may affect the reserves of the Central Bank, and the need to attract commercial banks to maintain liquidity will arise. For this reason, a specific timeline for the CBDC implementation has not yet been announced. The development of the digital shekel project began in 2017, but a year later, the regulator decided that the time to implement the CBDC had not yet come. In May 2021, a report came out (a link to download a pdf file of the report) by the Bank of Israel outlining the potential benefits of SHAKED, the project’s business model, and the current issues to be studied. It was also announced that the possibility of releasing the digital shekel is again being considered.
