The Bank of Israel, in collaboration with the central banks of Norway and Sweden and the Bank for International Settlements (BIS) Innovation Hub, has concluded a joint research project to

evaluate the potential issuance of a digital shekel and to examine the benefits and challenges of using retail central bank digital currencies (CBDC) in international payments. The project, known as Icebreaker, aimed to create a hub to interlink domestic systems across borders and streamline cross-border payments, which still face challenges such as high costs, low speed, limited access, and insufficient transparency.

The digitalization of the global financial system has led to central banks around the world considering the potential issuance of digital money as an alternative form of currency for the public. Retail CBDC would give households and businesses access to the Bank of Israel's digital money in addition to physical cash, constituting a liability of the central bank towards the holder of the currency.

The Bank of Israel's CBDC project manager, Yoav Soffer, noted that the project was a step closer to the goal of improving cross-border payments for Israelis. He also emphasized the importance of issuing a digital shekel according to evolving global standards to ensure efficient and accessible cross-border payments for Israelis. Bank of Israel deputy governor Andrew Abir added that the successful project's learnings were important for the central banking community, despite much work ahead of the Icebreaker model becoming a global standard.

As digitalization continues to advance, the Bank of Israel has been preparing for the eventual launch of a digital currency over the past few years, ready to take advantage of the benefits if the conditions are right. The potential benefits of CBDCs include streamlining and lowering the costs of cross-border payments, and the ability to interlink domestic systems across borders, creating a hub to improve access to cross-border payments.

The joint research project is an example of collaboration between central banks to develop a model for digital currency payments. As central banks evaluate the potential issuance of CBDCs, it is important to consider evolving global standards and work collaboratively to develop models that can streamline and improve cross-border payments. The successful Icebreaker project is an example of what can be achieved when central banks work together towards a common goal. Photo by צילום:ד"ר אבישי טייכר, Wikimedia commons.