The Bank of Israel recently announced its support for the development of a new Israeli shekel central bank digital currency (CBDC) that may offer interest-bearing options. This CBDC will operate on a two-tier model with features such as instant 24/7 payments, multipayment support, offline usability, balance limitations, and the potential for interest-bearing accounts.

Regarding user privacy, the central bank specified that while it will have access to necessary operational information, personally identifiable data of users’ balances and transactions will remain confidential. Currently, commercial banks in Israel offer 4.86% interest on fiat shekel deposits. Under the CBDC plan, banks can hold non-interest bearing shekel CBDCs as part of their short-term liquidity reserves.

The development of a digital shekel has been under consideration since 2021, with no concrete pilot tests initiated yet. The Bank of Israel emphasized that decisions regarding the digital shekel system are still in progress. In a related development, the central bank indicated that the issuance of a shekel CBDC could be considered in response to increased stablecoin usage.

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