According to a report published by Reuters, Israel’s central bank is giving serious consideration to a plan that would create a new, state-backed cryptocurrency for the country. The report includes few specifics about the proposed digital currency, and cites only a single, anonymous source within the Bank of Israel. Should the Bank of Israel approve the plan, the source claims, the new cryptocurrency and regulatory reforms related to it will appear in the country’s 2019 budget proposal.
If true, Israel would be the first state-level player to launch a native cryptocurrency, although the idea has been floated by other nations, such as Estonia and Venezuela. The Reuter’s source claims that the Bank of Israel’s intention is to reduce the supply of physical cash in the country, a move designed to weaken the nation’s substantial black market economy. According to some estimates, Israel’s “black economy” may account for as much as 22% of the country’s GDP, representing a loss of more than $14 billion in tax revenues.
The proposed cryptocurrency — dubbed the “digital shekel” by the Times of Israel — would only share some features of typical cryptocurrencies, according to Reuters, relying on fully centralized network managed by the Bank of Israel. The system would also include built-in features to combat money laundering and tax evasion, although specifics of how this will be achieved — or even if the system will utilize blockchain technology — remain a mystery. Alternative models for near-instant bank-to-bank settlements, such as the Single Euro Payments Area (SEPA), already exist in the E.U., and it’s possible that Israel may opt to move towards that technology instead of a dedicated cryptocurrency.
Even if a state-backed cryptocurrency did make it into Israel’s upcoming 2019 budget proposal, internal opposition to the plan could be substantial. In another story published this week, the chairman of Israel Securities Authority (ISA), Shmuel Hauser, proposed a ban that would prevent all cryptocurrency-related companies from being listed on the country’s stock exchanges.
“If we have a company that their main business is digital currencies we would not allow it,” Hauser said during a presentation at the Calcalist business conference. “If already listed, its trading will be suspended.”
Israel has a substantial cryptocurrency startup community, and there is certain to be pushback from innovation-minded lawmakers should the ISA move forward with a stock market ban for bitcoin-related businesses. Should the Bank of Israel actually have a state-backed cryptocurrency in the works, some of that pushback could even come from the central bank itself.
