Palestine is trying to create a digital currency to gain freedom over its finances and to emancipate itself from Israel. Corresponding studies are already underway, but some experts are skeptical.
The arms race over central bank digital currencies (CBDC) continues. Media reports According to the Palestinian Monetary Authority is now also working on issuing one. Feras Milhem, the governor of the agency, told Bloomberg Television that two studies are being conducted on cryptocurrencies. The digital currency is to be used for domestic and international payments at an unspecified time. Their goal should be to achieve a higher degree of financial independence.
In addition to Palestine, there is now a whole list of states that are trying to emancipate themselves from other economic powers using crypto currencies. A stable CBDC would also enable them to circumvent its sanctions.
However, Palestine occupies a special position among these countries. 138 of the 193 countries of the United Nations (UN) recognize the country as sovereign. However, those who do not include both Israel and the United States. So two countries that are politically not exactly insignificant. Israel currently exercises military and financial control over Palestine. With its sanctions policy, the USA, on the other hand, has a powerful weapon with which to control economically unstable countries.
Palestine without its own national currency for 70 years
This is all the more problematic for Palestine as the country does not have its own currency. Most of the business is carried out in Israeli shekels, Jordanian dinars or US dollars. Whichever way you turn it, the Palestinian economy is always dependent on a third power. A separate CBDC would therefore be an eminently important step towards financial sovereignty. However, some analysts view these plans with skepticism.
The macroeconomic conditions do not allow a Palestinian currency – as a CBDC or otherwise – as a means of payment
Raja Khalidi, director of the Palestine Economic Policy Research Institute, told Bloomberg.
But the situation in Palestine is precarious. Israeli anti-money laundering laws have left Palestinian banks with an abundance of Israeli shekels. The restrictions on how many shekels the banks can return to Israel each month has created an unsustainable financial situation for many. For his part, Barry Topf, former senior advisor to the Governor of the Bank of Israel, assured that the Palestinian CBDC will not perform two of the main functions of money:
It will not replace the shekel or the dinar or the dollar. It will certainly not be a store of value or a unit of account.
Other currency areas do not know these problems from Palestine. The European Central Bank recently announced that it would respect privacy when introducing the digital euro. China is about to introduce a digital yuan, which, according to experts, is also possible on the back of Ethereum.