The Bank of Israel has taken a significant step toward exploring the future of money by unveiling a preliminary design for its potential central bank digital currency (CBDC), dubbed the digital Shekel (DS).
Released on March 3, 2025, this detailed proposal outlines the ecosystem, technical framework, and regulatory considerations for the DS, although the central bank has not yet committed to an official launch.
The move reflects Israel’s cautious yet proactive approach to modernizing its financial infrastructure in an increasingly digital world.
The digital shekel design
The digital shekel design stems from years of deliberation by the Bank of Israel’s Steering Committee, which has been weighing the merits of a CBDC since identifying key motivations for its development.
Among the CBDC’s merits are the creation of a robust alternative payment system, cost reduction for transactions, and enhanced privacy for users.
The committee also sees the digital Shekel as a tool to support the government’s efforts to curb the “black economy”—a term referring to unreported or illicit financial activities—while fostering innovation in Israel’s payment landscape.
What sets the digital Shekel apart is its promise of inclusivity and accessibility.
The central bank envisions a currency that serves every segment of society, from children and foreigners to businesses and public institutions.
This broad reach is intended to ensure that no one is left behind as Israel explores digital finance.
Beyond accessibility, the DS would offer practical features like offline functionality, allowing transactions without an internet connection, and instant settlements to speed up payments.
Interoperability is another cornerstone of the design.
The digital Shekel would seamlessly integrate with existing payment systems and digital asset networks, enabling users to send or receive funds even if the other party doesn’t directly use the DS.
This flexibility could position the digital Shekel as a bridge between traditional finance and emerging digital ecosystems, making it a versatile tool for both everyday transactions and complex financial operations.
Public-private partnership amid a ‘Digital Shekel Challenge’
The Bank of Israel won’t tackle this project alone.
While it would retain sole authority to issue the digital Shekel, private-sector firms would play a crucial role in its rollout.
These companies would handle user onboarding, convert traditional deposits into digital Shekels, and provide advanced financial services to enhance the currency’s utility.
This public-private partnership aims to combine the stability of a central bank-backed currency with the innovation and agility of the private sector.
To refine the concept, the central bank has launched the “Digital Shekel Challenge,” inviting technologists and businesses to propose real-world applications for the CBDC.
This initiative is part of a broader effort to gather insights and ensure the digital Shekel meets practical needs.
In parallel, the Bank of Israel is collecting public feedback until April 30, 2025, and plans to issue Requests for Information (RFIs) to technology providers to explore implementation strategies.
But despite the detailed planning, the digital Shekel’s fate remains uncertain.
The central bank has set a timeline for a final decision after 2026, emphasizing that the launch hinges on extensive research, public input, and regulatory clarity.
This deliberate pace reflects a balance between embracing technological progress and mitigating risks in a rapidly evolving financial landscape.
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