Israel’s central bank eyeing centralized digital currency setup

While traditionally, digital currencies such as the bitcoin, have always been decentralized and provide anonymity to the holder of the currency, Israel’s digital currency is likely to be centralized and compliant with existing money laundering laws.

Israel’s central bank, the Bank of Israel, stated it is examining the possibility of issuing digital currency in order to streamline the twin objectives of creating a faster payment system as well as reducing the amount of cash floating in its economy, said a source from within the bank.

The source however stressed that a decision to this effect is still pending.

As per the source, the government has signaled its readiness to either legislate on the issue or to bring it about in its 2019 budget if it gets the go ahead from its central bank.

The source, speaking on the condition of anonymity, said if any digital currency is issued, it would be centralized and would be in accordance with the country’s laundering rules – in contrast to bitcoin which is decentralized and whose values are subject to wild oscillations.

“Central banks around the world are examining (the use of digital currencies) so we should as well,” said the source.

The Bank of Israel declined to comment on the issue.

Incidentally, for quite a few years now, the Israeli government has been trying to limit the availability of cash in its economy in view of the existence of the black economy – estimated at some 22% of its national output.

In fact in November, the Bank of Israel had called for a public consultation on proposals asking for the creation of at least one infrastructure that would support fast payments in Israel, similar to those used in Sweden and Britain.

As per the source, a fast payment system is an option, while “a central bank- issued digital currency is another form of an advanced payments system which currently does not exist”.

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