The Bank of Israel has used Ethereum’s blockchain technology, the world’s second-largest after Bitcoin, to evaluate the digital shekel’s issuance. Teams from the Bank of Israel’s Information Technology Division set up an experimental environment based on Ethereum’s blockchain technology, and the bank issued a token representing digital shekels, as well as digital wallets, as part of the bank’s digital currency issuance pilot.
BOI successfully tested the ability to program the vehicle ownership certificate in the form of a non-fungible token (NFT) and produce a transaction in which the condition for transferring ownership and the transfer of payment both actions happen simultaneously, without risk and without the need for a third party.
According to the research, this application is only one example of what payment service companies entrusted with offering public digital wallets could be able to create. According to reports, the BOI has invited industry players to submit a variety of smart applications that might be built on the architecture of a future digital shekel.
The Bank of Israel’s proposed model indicates that the system’s registration mechanism might be based on Distributed Ledger Technologies (DLT), such as the different blockchain technologies (of which Ethereum is one), or on acknowledged central registration technologies.
That is, bankers are experimenting with the technology to learn about its benefits and drawbacks, and they may subsequently look into alternative technologies. The Bank of France, for example, is now testing eight different technologies at the same time.
Globes, an Israeli financial news site, on the other hand, said that the central bank has not been open regarding its present experimental CBDC study in general. During a talk at the Fair Value Forum in Herzeliya IDC earlier this month, the BOI’s deputy governor confirmed that a preliminary CBDC pilot was already underway, according to Cointelegraph.
The bank’s study also emphasized the interdependence of digital identification technologies and CBDCs, as well as the advantages of performing proofs-of-concept that may aid the institution in determining the relevance, dangers, and benefits of a digital shekel for the Israeli economy as a whole.
After a committee led by former Governor Dr. Karnit Flug recommended against issuing a digital shekel in late 2018, this involvement with CBDCs shows fresh impetus and interest in CBDCs within the institution.
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