The use of stablecoin is seeing immense growth in the biblical holy land.
The Bank of Israel published a report on Monday detailing the possible outcomes that would warrant a decision to issue a digital shekel.
The decline in the use of cash would undoubtedly lead Israel to develop its own central bank digital currency (CBDC), as would a good decision by the United States or the European Union to do so.
A CBDC is the digital equivalent of a country’s fiat currency (money guaranteed by the government.
CBDCs use stablecoins, whose value is fixed to a reference asset like fiat currency, to provide the same functions as conventional currency.
Although 90% of the world’s central banks are looking into CBDCs, just a handful have progressed to the stage of issuance, as noted in the Bank of Israel’s 21-page study explaining the scenarios.
Stablecoin: The Best Alternative To Cash?
The Bank of Israel Steering Committee identified a drop in cash use in Israel as a potential driver of CBDC development. It noted that consumers still rely heavily on cash for their purchases, but that this may change as people adapt to new payment methods.
When compared to more conventional payment methods, stablecoin transactions have many advantages, including speed, low cost, and safety.
They also fill a need for an electronic replacement for currency, which is losing favor in many countries. However, there are issues with CBDCs that need to be carefully evaluated and handled, including concerns about financial stability, privacy, and cybersecurity hazards.
The bank acknowledged that the success of CBDCs from other countries, including the United States or the European Union, has a role in the issuance decision in Israel.
CBDCs And International Collaboration
Earlier, the Bank for International Settlements (BIS) collaborated with the central banks of Israel, Norway, and Sweden to investigate the potential of stablecoin for cross-border retail and remittance transactions.
In terms of crypto legislation, Israel appears to be following the United States’ lead. Israel’s securities regulator, the Israel Securities Authority (ISA), proposed legislation earlier this year that would treat cryptocurrency assets like stocks and bonds.
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Analyst and veteran trader Ilan Tennenbaum said:
“The situation right now in the world is that some countries – for example, Australia, Brazil, Canada, China, India, and Japan – already have a CBDC project on some level.”
The BOI will keep an eye on how other countries handle these issues. It tested a private-by-design CBDC blockchain technology last year.
It also took part in Project Icebreaker, which studied the utility of CBDCs for international money transfers.
-Featured image from JPost Staff