Israel Launches Trial of CBDC for Payment Digital Shekel

Israel's Domestic Central Bank Digital Currency (CBDC) intends to accelerate the development of the digital shekel.

The Bank of Israel plans to engage various service providers to jointly develop an advanced digital payment ecosystem centered on the digital shekel. A rough version of the Central Bank announcement reads:

“As part of its action plan to issue a digital shekel, the Bank of Israel is planning a “Digital Shekel Challenge” – an initiative of “Project Rosalind” conducted by the BIS Innovation Hub.

Project Rosalind is a joint effort between the Bank of International Settlements (BIS) and the Bank of England to develop a prototype for an application programming interface.

As part of the test, BoI provides a sandbox environment associated with the Application Programming Interface (API) layer. Participants compete to build real-time CBDC payment systems for the general public.

Read Cointelegraph's crypto guide to learn more about blockchain APIs.

Speaking to Cointelegraph, Shauli Rejwan, Managing Partner of Masterkey Venture Capital, a Tel Aviv-based venture capital firm, explained the startup in detail.

The program consists of three stages: application and presentations, access to the new network for the selected projects and a final presentation to the judges, some of whom spoke at recent crypto events.

Although decentralized financing, zero knowledge and license-free solutions have yet to be considered, he believes the initiative can bridge the gap between the Web3 industry and government.

Israel invited parties from the private, public and academic sectors to participate in the trial. The central bank added:

“It prioritizes usability, whether it's improvements to existing apps in the payments world or completely new apps with original and innovative features.”

While CBCCs are designed to serve universal use cases, Israeli CBCC trial participants are also allowed to develop solutions for specific locations and situations.

Related: Israel Announces Interest-Bearing Shekel CBDC Plan

On April 16, BoE Deputy Governor Andrew Abeer said CBCC's competition with banks is good for the country's economy.

Abir believed that the development of digital currency will get support from the people.

“The digital download is not produced by the anonymous Satoshi Nakamoto. Everyone knows who is behind the digital upload and who is responsible for it – […] The bank of Israel that stands behind the cash we all know and trust.

According to Abir, the digital currency can also benefit BOI. The mere option of holding a digital shekel could encourage banks to charge higher interest rates, he added.

The May 11 public consultation report confirmed Abir's view of public support for the CBCC development.

“All responses to the public consultation indicate support for ongoing research on the various impacts on payments markets, financial and monetary stability, legal and technological issues and more.”

However, respondents unanimously raised concerns around the potential for CBDC to lead to privacy breaches.

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