The Central Bank of Israel (BOI) believes that the adoption of the digital shekel by the population may lead to a decrease in the volume of deposits of individuals.
The BOI issued a statement suggesting that a study of the possible impact of the state cryptocurrency showed that the expected effect may be more noticeable than previously thought. The issuance of the digital shekel (SHAKED) is likely to increase costs and reduce the net profit of the banking system.
The BOI says that the conversion of fiat currency from private individuals’ deposits to SHAKED will affect the ratio of the balance of the banking system and the Central Bank. The balance of the banking system will decrease due to the reduction in the item “Deposits of the population” in liabilities and “Deposits in the Bank of Israel” in assets. And if the banking system plans to maintain the available loan portfolio for individuals at the level preceding the launch of SHAKED, this “may undermine the liquidity indicators of banks to a certain extent.”
The BOI began actively exploring the possibility of issuing its own digital currency in mid-2021, and identified the goals and possible benefits of the digital shekel. As of early 2022, the regulator has not made a final decision on issuing CBDCs.
Source: Bits
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