Israel is planning to fast-track the creation of its own central bank digital currency (CBDC), known as the digital shekel. The Bank of Israel (BoI) intends to collaborate with various service providers to develop an advanced digital payments ecosystem centered around the digital shekel. This joint effort, called Project Rosalind, is a partnership between the Bank for International Settlements (BIS) and the Bank of England, with the goal of creating prototypes for an application programming interface (API).
As part of the project, the BoI will offer a sandbox environment with a layer of APIs. Participants will compete to build real-time CBDC payment systems for the general public. The initiative aims to bridge the gap between the Web3 industry and the government, even though decentralized finance, zero knowledge, and permissionless solutions are not currently being considered.
Israel has invited entities from the private, public, and academic sectors to participate in the experiment. While CBDCs are designed to cater to universal use cases, participants in Israel’s CBDC experiment are also encouraged to develop solutions for unique niches and scenarios.
BoI deputy governor Andrew Abir has expressed his belief that competition between CBDCs and banks is beneficial for the country’s economy. He is confident that the digital shekel will receive support from the public. Abir also mentioned that the BOI could benefit from the digital shekel, as the option to hold digital shekels could incentivize banks to offer higher interest rates.
A public consultation report in May confirmed that the development of a CBDC has widespread support from the public. However, respondents raised concerns about the potential privacy breaches associated with CBDCs.
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