Bank of Israel Steps Up CBDC Efforts With Ethereum Network Testing

Israel’s central bank would have completed a pilot – under the radar – for a central bank digital currency (CBDC) using Ethereum technology. The claim was made by Israeli financial news website Globes and was later reported by BNN Bloomberg.

Globes’ sources for his claims have not been disclosed: The report claimed that the Bank of Israel (BOI) completed its pilot project in an experimental and closed environment based on the Ethereum architecture, which involved issuing test tokens representing digital shekels and transferring them between digital wallets..

Globes also claimed that as part of its pilot, the BOI successfully tested its ability to schedule the transfer of a certificate of ownership of a car with non-fungible digital tokens (NFTs) and complete a transaction where payment of the NFT became a condition of the certificate transfer and vice versa. The transaction was instantaneous, with no risk or need for a central agent or trustee.

Bank of Israel Steps Up CBDC Efforts With Ethereum Network Testing
Bank of Israel Steps Up CBDC Efforts With Ethereum Network Testing

According to the report, this application is just one possible example of what payment service providers tasked with making digital wallets available to the public could build. The BOI has reportedly asked industry players to develop several smart applications that could likely be built on top of the infrastructure of a future digital shekel.

Globes argued, however, that by and large the central bank has not commented on its current experimental CBDC research. As reported by Cointelegraph, the BOI’s deputy governor only revealed that, in fact A preliminary CBDC pilot was already underway during a discussion at the Fair Value Forum in Herzeliya IDC earlier this month.

Globes called the deputy governor’s concession the result of “cornered” and criticized the central bank for failing to go far enough with local industry in examining the very complex issue of CBDCs.

However, The BOI published a detailed report last month outlining its analysis and review of various alternatives and models for a possible CBDC., stresses, however, that the document and the proposed CBDC model are intended only as a basis for discussion, not as a draft:

“This draft does not represent a decision by the Bank of Israel on the properties of the digital shekel, if issued. The draft model forms the basis for discussion and the weighing of alternatives by work teams dealing with the question at the Bank of Israel, and once this document is published, it will also serve as a basis for discussion among experts in Israel about the features required for the digital shekel. “

This commitment to CBDCs shows a new dynamic and renewed interest in CBDCs in the institution.after a team led by the former governor Dr. Carnit flight, recommend not to issue a digital shekel by the end of 2018.

While the BOI report for May does not mention Ethereum, It points out that “the various opportunities a digital shekel could offer for payment system innovation in the Israeli economy include smart contracts, programmable money and the like”.

The BOI report for May also makes no mention of smart apps or NFTs. However, it does indicate the potential benefits of using distributed ledger technologies over existing centralized technologies for different parts of the digital shekel ecosystem.

The bank’s report also highlighted the interdependence of developments in CBDC and digital identity technologies, highlighting the benefits of conducting proofs of concept that could help the institute assess the relevance, risks and benefits of a digital shekel to the economy.

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