The Bank of Israel is in the process of launching a sandbox environment for testing CBDC use cases, with the goal of refining the design of the digital shekel and ensuring its capacity to facilitate advanced applications. This sandbox will provide a controlled environment for the evaluation of novel digital technologies and financial innovations before their widespread implementation. It will allow financial institutions, fintech enterprises, and other stakeholders to collaboratively develop and test innovative applications for the digital shekel. The central bank’s deputy governor, Andrew Abir, stated that the project will be officially announced in the coming weeks.
During a recent address, Abir described the digital shekel as a “liability of the Bank of Israel to the public,” emphasizing its similarity to physical cash in terms of lack of credit risk. He also made it clear that the digital shekel should be distinguished from cryptocurrencies, as it will be developed and backed by the central bank. Unlike cryptocurrencies, the value of the digital shekel will remain stable, with one digital shekel always being worth one cash shekel, which is always worth one shekel in a bank account. This stability sets it apart from the volatility often seen in cryptocurrencies.
Abir highlighted the utility of a CBDC, explaining that it will enable various transactions that are currently not possible with cash, particularly in the e-commerce sector. The digital shekel will operate on a two-tiered model, allowing a wide range of entities to participate as Payment Service Providers or Additional Services Providers within the platform. In contrast to the current practice of limiting access to traditional banks, the Bank of Israel plans to make the platform accessible to a broader array of participants, including payment companies, fintech firms, consumer clubs, and others.
By creating a sandbox environment for testing CBDC use cases, the Bank of Israel aims to promote innovation in the realm of digital currencies and ensure that the digital shekel can support advanced applications. The central bank’s deputy governor stressed the stability of the digital shekel’s value compared to the volatility of cryptocurrencies, emphasizing that it will always be worth one cash shekel, which is always worth one shekel in a bank account. The digital shekel’s two-tiered operational model will enable a diverse range of entities to participate in the platform, expanding access beyond traditional banks to include payment companies, fintech firms, consumer clubs, and more.
In the coming weeks, the Bank of Israel will officially announce the launch of a sandbox environment for testing CBDC use cases, with the intention of refining the design of the digital shekel and ensuring its capacity to support advanced applications. This controlled environment will provide financial institutions, fintech enterprises, and other stakeholders the opportunity to collaboratively develop and test innovative applications for the digital shekel. The stability of the digital shekel’s value, in contrast to the volatility of cryptocurrencies, will enable various transactions currently not possible with cash, particularly in the e-commerce sector. The two-tiered operational model of the digital shekel will broaden access to the platform, allowing a wider range of participants to engage as Payment Service Providers or Additional Services Providers.
