According to reports, the Bank of Israel launched a pilot program for digital currency. It aimed to create a central bank digital currency using the Ethereum blockchain. The project could face significant difficulties.
Israel aims at CBDC
Many countries, including France, Japan, China, Sweden and France, have spent years working to develop a digitalized version their national currencies.
Globes reports that Israel’s central bank has joined the trend, and is in the early stages of issuing a CBDC. To achieve this goal, the institution chose to use the Ethereum network. Yoav Soffer, the Bank of Israel’s CBDC Project Manager, explained why.
“We tried Ethereum technology not because that’s the technology we’ll use but because it was something we could get our hands on to learn its benefits and drawbacks.”
The Bank of Israel set up teams to test the Ethereum blockchain, and issued tokens representing CBDCs. It then created digital wallets that allowed team members to exchange “imaginary digital Shekels” within the bank.
It is important to note that Australia, Hong Kong and Thailand used the exact same method in their CBDC projects. Israel, on the other hand, also looked at the technological, economic and legal aspects.
Soffer called the initiative “challenging.” He also noted that it was difficult to set a deadline for the testing project due to its complexity.
“Projects at the Bank of Israel generally have start and end dates. It is easy to predict when the project will finish and what you have to do. “We don’t know when the project will end.
Yoav Soffer, Source: Twiiter
Digital payment methods were a rising trend in Israel during the COVID-19 pandemic. It seems that issuing a CBDC fits in with society’s new ways of doing business. However, it faces many challenges.
The Bank of Israel isn’t sure if it has the technology to create a digital shekel that meets all local needs. The infrastructure to support such a product is not yet ready for long-term.
Israel’s financial institution must be able to provide a solution for an emergency or network breakdown, so that transactions can be settled offline.
A CBDC must be developed by the central bank that is both affordable and competitive with other payment methods. Israelis could settle their daily transactions using traditional methods if this happens.
The most difficult challenge is to get people who used cash to switch to digital payments. The former is anonymous, but the digital shekel is private. This is exactly what could lead to privacy breaches.
GulfNews Featured Image
Marla Brooks – Financial Analysis
My name is Marla Brooks, and I am the mainstream behind the”observednews.com” for the powerful and most delicate insights into the latest activities in the financial analysis category. I started my journey as an independent financial consultant. I had approximately nine years of experience in this field. I am free soul so; my passion for exploring the world has taken me to the nations across the globe and given me the chance to report for a portion of the best news associations. Currently, I am a full-time editor as experienced in finance and started to use my abilities.