The Bank of Israel has put forward a possible design for a central bank digital currency (CBDC) should the decision be made to introduce one in the future.
The central bank described the proposed digital shekel (DS) as a “multipurpose CBDC”, to wit it would be for both retail and wholesale use, in a paper published on Tuesday.
“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 paper said.
The Bank of Israel would therefore be providing a digital equivalent to cash while also upgrading its existing settlement system that financial institutions already use, adding “smart” functionality, such as composability and programmability.
The central bank also stressed that no decision has been made whether to issue a CBDC. Therefore, the design presented by the paper should only be considered a preliminary one.
The central banks of almost all the developed economies across the world have at least been exploring the possibility of issuing a CBDC for several years.
While their proponents argue they are a tool for financial inclusion and a means of future-proofing fiat currencies against the decline in cash usage, they are also criticized by those who see them as a Trojan horse for reinforcing state control over the use of money.