Israel on the way to developing digital schekel based on Ethereum (report)

Israel on the way to developing digital schekel based on Ethereum (report)

According to reports, the Bank of Israel has launched a pilot program for digital currencies that aims to create its digital central bank currency based on the Ethereum blockchain. However, the project could face some considerable challenges.

Israel strives for CBDC

Many leading nations including China, Japan, France, Sweden and others have been working on the development of a digitized version of their state currency for years.

According to a Test report The Israeli central bank has joined the trend from Globes and is in the initial phase of the output of a CBDC. The institution chose the Ethereum network to reach the step. YoAV SAFFER-CBDC project manager at Bank of Israel-explained why:

"We did an attempt with Ethereum technology, not because we believe that this is absolutely the technology that we will use, but because it was a technology with which we were able to get our hands dirty to understand their advantages and disadvantages."

The Bank of Israel has formed teams that have set up a test environment based on the Ethereum blockchain and issued a token that represents CBDCs. Then she designed digital wallets, from which team members within the bank were able to exchange "imaginary digital schekel".

It is worth noting that Australia, Hong Kong and Thailand used the same methodology in their CBDC projects and that Israel also examined the legal, economic and technological aspects.

The initiative described Siffer as "challenging". He also pointed out that due to its complexity it is difficult to specify a final day for the test project:

"In general, projects at the Bank of Israel have starting and end dates. You know when you will end and what you will have to reach on the way. We do not know when this project will end with everything that belongs."

Yoav Satffer, Twiiter

The challenges

During the Covid 19 pandemic, digital payment methods in Israel are on the rise. Therefore, the exhibition of a CBDC sounds like an idea that can fit into the new habits of society. Nevertheless, there are some challenges before.

The Bank of Israel is not sure whether it can develop such a digital version of the desk that meets all needs of the local population. In addition, the infrastructure for such a product does not seem to be completely sustainable in the long run.

For example, Israel's leading financial institution must have a solution in an emergency or in the event of a failure of the network so that people can also handle transactions offline.

The central bank also has to develop a CBDC that is both accessible and competitive compared to other payment methods. Otherwise, Israelis could simply handle the daily transactions with other traditional methods.

Probably the biggest challenge of everyone is to get people who use cash to switch to digital payments. The first method is anonymous in good and bad, while the government's use of a digital desk would be carefully monitored by the government, which threatens exactly privacy.

Selected picture with the friendly approval of Gulfnews

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