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Bank of Israel deputy governor advocates for digital currency

In this post:

  • Bank of Israel deputy governor views CBDC differently.
  • Andrew Abir claims that  CBDC competition with banks is good for economy.
  • The introduction of a digital shekel would benefit the Bank of Israel.

The deputy governor of the Bank of Israel, Andrew Abir, has initiated mixed reactions after his recent views on central bank digital currency (CBDC). Though the effects of CBDC on commercial banks have usually been perceived as a threat, Abir in a speech posted on the central bank’s site, viewed CBDC differently.

Competition driving innovation in Israeli banking sector

Competition in the Israeli banking sector, which has resulted from over a decade of efforts, has brought about some benefits, but “we still have a long way to go,” Abir said. As the Bank of Israel raised interest rates to fight inflation, banks raised interest rates on credit, but the increase in deposit rates was “partial and slow.” 

The deputy governor noted that commercial banks do not win public popularity contests in many countries worldwide, including Israel. In Israel, some of the anger directed at the banking system results from the need to increase the level of competition in some segments.

Confidence in digital shekel 

Abir confidently declared that the digital shekel, which is still in its planning stages, would enjoy public support. Another advantage of the digital shekel would be to the Bank of Israel itself since it would make central bank money more liquid. 

“The digital shekel will not be developed by some anonymous Satoshi Nakamoto. Everyone will know who is behind the digital shekel and who is responsible for it — […] the same Bank of Israel that stands behind the cash we all know and trust.”

Abir said that the digital shekel would be of great help to the bank for example, for settlement of digital payments, reverse the decline in central bank money use brought by technological innovations in the private sector. Just the possibility to hold digital shekels would force the banks to pay higher interest. Therefore, the digital shekel would provide the central bank with an instrument to control the extent of the transmission of central bank interest rates.

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decisions.

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