Andrew Abir said that in recent years, to combat inflation, the Bank of Israel has raised interest rates, and commercial banks have increased lending rates. At the same time, the growth of deposit rates was slow. Therefore, the Israeli government still has a long way to go to increase competition in the banking sector, and a central bank digital currency (CBDC) can help with this, Abir noted.
The infrastructure of the digital shekel implies the possibility of paying interest. Thanks to this, the digital shekel will enjoy public support, even if it is currently in the research stage. According to Abir, the introduction of a digital shekel will make ordinary money more accessible: it can be used in digital payments and become a strong competitor to private cryptocurrencies. The very possibility of storing digital shekels will encourage banks to pay higher interest rates.
“The digital shekel will not be developed by some anonymous Satoshi Nakamoto. Everyone will know who is behind the government stablecoin and who is responsible for it. This is the Bank of Israel, which issues cash and is trusted by the population. Unlike the volatile Bitcoin, whose rate can change by tens of percent in a few days, the digital shekel will always be equal to one shekel in cash. Its purchasing power will always be preserved because the Bank of Israel maintains its inflation target,” explained Andrew Abir.
Bank of Israel researchers began studying the risks and benefits of the digital shekel in 2021. Last year, the Central Bank of Israel announced that it would launch its own digital currency, provided that the central banks of the United States, the European Union and other developed countries do so.
Source: Bits
I am an experienced journalist, writer, and editor with a passion for finance and business news. I have been working in the journalism field for over 6 years, covering a variety of topics from finance to technology. As an author at World Stock Market, I specialize in finance business-related topics.
