Israel and Palestine Studying Possible Digital Currencies
- Israel looking to issue a digital version of the shekel
- Palestine is studying the feasibility of its own digital currency
The two rival states, Israel and Palestine, are exploring the field of digital currencies. Israel, on the one hand, is looking into issuing a central bank digital currency (CBDC) that will complement its shekel. On the other hand, Palestine is investigating the space with the aim to break away from its dependence on the shekel.
Israel Published a Research Paper Focused on the Benefits of a CBDC
Israel’s central bank, the Bank of Israel, published a research paper in May that says a potential digital shekel could help the Israeli economy. The report mentions that Israel has been exploring CBDCs since 2017, during bitcoin’s first trading frenzy that shot the largest cryptocurrency to levels near $20,000.
“The Bank of Israel has not yet decided whether it intends to issue a digital shekel,” the report reads. “But in view of the rapid developments in the digital economy and in payments, and in view of the major central banks’ work on the issue, the Bank of Israel is accelerating its research and preparation for the potential issuance of a digital shekel. “
The Bank of Israel joined other central banks around the world, which are also examining the issue of digital versions of their own fiat currencies. The Federal Reserve, the central bank of the US, is expected to present this summer a research paper discussing the potential benefits of a digital dollar. The European Central Bank took to the public to seek opinions on digital currencies. Through this, it aimed to gather enough data to see if European citizens would like to have a digital euro.
Palestine Explores Digital Currencies as a Way to Monetary Independence
At the same time, the Palestinian Monetary Authority has began studying the feasibility of a Palestinian digital currency. Digital money issued by Palestine would allow the state to reduce its dependence on the Israeli shekel. In fact, Palestine has relied on it since the Paris Protocol on Economic Relations, a 1994 agreement signed with Israel.
Part of the agreement said that Palestine would not be allowed to issue its own currency. The validity of the Protocol was agreed to last five years. However, almost thirty years later, there has barely been any progress. The Palestinian economy still relies on the Israeli shekel, alongside the US dollar and the Jordanian dinar.