The test will be cyber-safe and under the proposed model, intermediaries will have no financial risk from clients holding or transferring CBDCs, leading to reduced risk and cost, the Bank said. ‘Israel.
The Sela project, led by the Hong Kong center of the BIS Innovation Hub, is expected to start in Q3 with results to be released by the end of the year.
The Bank of Israel has intensified its research and preparations for the possible issuance of a digital shekel to create a more efficient payment system, after first considering issuing a CBDC in late 2017.
“Providing an efficient payments system that will increase competition in the payments market is one of the key motivations we have identified for a potential digital shekel issue – an Israeli CBDC,” said Andrew Abir, Deputy Governor of the Bank of Israel, in a press release.
Last month, the bank said that although it had received public support, it had not yet made a final decision on issuing a digital shekel.
The joint project will explore the feasibility of a two-tier architecture where there is no financial exposure of intermediaries involved in the transaction, unlike traditional methods of making central bank funds available to the public via commercial banks.
“This architecture is supposed to have several advantages: less financial risk for the customer, more liquidity, lower costs, increased competition and wider access,” the Bank of Israel said.