Key Considerations:

• The Bank of Israel has proposed a design for a CBDC that might be established in the future.
• Described as a “multipurpose CBDC”, the digital shekel aims to cater to both retail and wholesale markets.
• Central banks worldwide are actively exploring the concept of issuing a CBDC, highlighting its global relevance.

The Bank of Israel has introduced a prospective design for a central bank digital currency (CBDC), pending future approval. The proposed digital shekel (DS) is characterized as a “multipurpose CBDC”, intended for both retail and wholesale applications, according to a recent publication.

“The DS will be a multipurpose digital currency that will address both the retail needs of end users such as households and businesses as well as the wholesale needs of financial entities.”

The Bank aims to provide a digital substitute for cash and enhance its existing settlement mechanisms while incorporating functionalities like composability and programmability.

However, it remains crucial to note that no definitive decision regarding the issuance of a CBDC has been reached. Thus, the design is preliminary. Over the years, central banks in developed economies have been scrutinizing the potential of CBDCs, which are viewed as tools for ensuring financial inclusion and adapting to decreasing cash utilization, albeit criticized by some for potentially tightening state control over monetary systems.