The Israel Central Bank said on Tuesday that it is initiating the Digital Shekel Challenge as part of a “action plan for a possible issuance of the digital shekel,” with the goal of exploring applications in the payments industry.
Reportedly, the Bank of Israel has developed a technology prototype that “emulates the heart of the digital shekel system.” The system would be accessible to payment service providers, enabling them to provide the general public early payment options.
The request for participants states that split payments, micropayments, and payments requiring multiple signatures would be investigated as payment forms.
“In the challenge, for the first time, we allow the financial industry from Israel and abroad and a wide variety of stakeholders in the payments system to cooperate with us in a practical way in thinking, planning and designing the digital shekel,” Andrew Abir, deputy governor of the Bank of the State of Israel.
Even though the Bank of Israel has been investigating the technology for years, the bank has not yet made up its mind about whether to launch a central bank digital currency (CBDC).
It claimed to have completed a pilot test in 2021 and to be monitoring various scenarios, including the potential widespread adoption of stablecoins, in the previous year.
It also carried out a project to investigate ways to secure the systems against hacking in collaboration with Hong Kong and the Bank for International Settlement (BIS). The challenge will begin on June 6 with an all-you-can-ask webinar.
It will then go via an application and presentation procedure, ending in a discussion of the outcomes at the end of September. The date of the last meetings and the results’ release is still pending. According to the release, the challenge was sparked by the “Rosalind Project” of the BIS Innovation Centre, which examined how application programming interface (API) functionalities could support a retail CBDC and enable safe and secure payments.
“This initiative is a significant step for the Israeli ecosystem, potentially bridging the gap between the web3 industry and government, even though DeFi, ZK and permissionless solutions are not yet being considered,” stated Saul Rejwan, managing partner of Masterkey VC