The Central Bank of Israel (BOI) has postponed the launch of the digital shekel until Western central banks introduce their own digital currency (CBDC) and the European Central Bank (ECB) introduces a digital euro.

BOI Deputy Governor Andrew Abir explained that the regulator is not sure about the need to launch a digital shekel. The central bank is conducting research and experiments, it has an action plan, and it will be implemented when the regulator deems it necessary.

“We are waiting for a Western central bank to pull the trigger, and it will almost certainly be the ECB. This will encourage other countries to launch state stablecoins,” Abir said.

The Bank of Israel began exploring the possibility of launching a CBDC to improve payments in the country back in 2017. In November 2020, the BOI’s interest in the digital shekel only intensified as the regulator began collaborating on the CBDC issue with the central banks of Hong Kong, Sweden, Norway, and the Bank for International Settlements (BIS).

The Bank of Israel has begun testing its own digital currency as part of the Digital Shekel Challenge, inviting traditional and fintech companies to join the project to explore potential use cases for a CBDC.

However, Abir doubts that the public is ready to use the digital shekel. The official noted the gap between theoretical research and practical use of CBDC. According to Abir, the results of some studies push people to use the digital currency. However, in practice, citizens must have several options for using the CBDC for people to agree to use the digital shekel.

In 2022, the Central Bank of Israel said that the state digital currency should be partially anonymous. Earlier, Bank of Israel researchers suggested that the transition to a digital shekel would allow for uninterrupted settlements even in the event of failures and force majeure.