Digital Shekel Promises to Boost Competition, Says Deputy Governor of Bank of Israel
Summary:
In his speech, Bank of Israel's Deputy Governor, Andrew Abir, underscores the potential of Central Bank Digital Currency (CBDC) to stimulate competition among commercial banks. The digital shekel, still in development, would offer a mechanism for the bank to influence interest rates, besides providing new options for digital payments. Unlike anonymous cryptocurrencies, the digital shekel creators would be publicly known. While the Bank of Israel aims to enhance competitiveness in banking, this initiative reportedly garners significant public support.
In a departure from the common viewpoint, Andrew Abir, the Deputy Governor of the Bank of Israel, asserts that central bank digital currency (CBDC) could spark competition among commercial banks. His observations were part of a speech posted on the central bank's online platform. Abir acknowledged progress made in boosting competition within Israel's banking sector, but noted that the journey remained considerable.
According to Abir, in Israel and globally, commercial banks frequently rank poorly in public perception. In his country, this dissatisfaction often sprouts from a requirement to enhance competitiveness in certain segments. The Bank of Israel, in an effort to quell inflation, hiked its interest rates. As a response, banking institutions also increased their credit interest rates, while the elevation in deposit rates remained gradual and tardy.
Abir emphasized on the upcoming digital shekel, a CBDC currently in its blueprint phase. As per its design, the digital shekel could accrue interest, which he believes would draw popular support. Unlike cryptocurrencies often associated with anonymous creators, Abir asserted that the creators and guardians of the digital shekel would be publicly known and trustworthy – the Bank of Israel.
The launch of a digital shekel, Abir said, could serve the central bank by offering digital payments options and reversing the descending usage of central bank cash caused by private sector's tech innovations. Moreover, he pointed out that the mere possibility of holding digital shekels could potentially prompt banks to offer better interest rates. This, in turn, would provide the central bank with a tool to manipulate interest rates' transmission degree. Reportedly, the digital shekel has been met with considerable approval from the Israeli public.
In related news, if stablecoin adoption escalates, Israel’s central bank might issue its own CBDC. IDF&M Magazine has also reported use of crypto in the ongoing Israel-Gaza conflict for destructive purposes.
Published At
4/16/2024 10:59:54 PM
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