Israel’s Digital Shekel: What the Preliminary Design Reveals
In March 2025, the Bank of Israel published a preliminary design for a possible digital shekel, its proposed central bank digital currency (CBDC). The document is a major step in a project the bank has been studying since 2017. The bank has not yet decided whether it will actually issue one.
So what would a digital shekel mean for everyday people, and how far along is the project?
Why Is Israel Considering a Digital Shekel?
Cash is losing ground as digital payments take over, and many central banks are exploring what that shift means for public money. The Bank of Israel has identified several reasons to consider a digital shekel:
- Creating an alternative payment infrastructure.
- Increasing competition in Israel’s banking and payments market.
- Lowering payment costs.
- Improving privacy.
- Supporting the fight against the black economy.
What Does the Preliminary Design Reveal?
A two-tier model. The Bank of Israel would issue and supervise the digital shekel. Licensed private companies, called Digital Shekel Payment Service Providers, would onboard users and provide the wallets and customer-facing services.
Equal to cash. The digital shekel would be legal tender, exchangeable one-to-one with any other form of shekel. It would sit alongside cash and existing payment methods, not replace them.
Instant and always available. Payments would be immediate and final, and the system would run 24/7, all year round.
Offline payments. The design includes offline wallets, so payments could still work without an internet connection.
Privacy with limits. There would be no central database of users’ personal information at the Bank of Israel. Anonymous payments would be allowed, but only for limited amounts, to stay in line with anti-money-laundering rules.
Works with existing systems. The digital shekel would be interoperable with other payment systems. One person could pay in digital shekels while the other receives the money in a regular bank account.
Not programmable. The bank has said the digital shekel would carry no built-in rules about how it can be spent.
Possible interest and holding limits. For the first time, the bank said balances could earn interest, to increase competition for deposits. It also said holding limits may be placed on balances to protect the banking system.
How Would It Affect Everyday Transactions?
If it is launched, the digital shekel could change how people and businesses pay:
- Faster payments: Transfers would settle instantly, at any hour.
- Lower costs: Basic personal use would be free. Businesses would pay fees, which the bank says would be lower than for current digital payments.
- Broad access: The design is meant to be open to everyone, including minors, foreigners, businesses and public institutions.
How Does It Compare to Cryptocurrencies?
- Who issues it: The digital shekel would be issued by the Bank of Israel. Cryptocurrencies like Bitcoin run on decentralized networks with no central issuer.
- Price stability: A digital shekel would always be worth exactly one shekel. Cryptocurrency prices can swing sharply.
- Regulation: The digital shekel would be built to comply with financial regulation from the start. Most cryptocurrency transactions are not anonymous but pseudonymous, meaning they are recorded publicly on the blockchain without names attached.
What Are the Challenges?
- Public acceptance: Not everyone is ready to switch, and the bank has studied how willing Israelis are to adopt a digital shekel.
- Cybersecurity: A digital currency system needs very strong protection against attacks.
- Impact on banks: If people move large amounts into digital shekels, bank deposits could shrink. This is why the design allows for holding limits.
- Legislation: Issuing a digital shekel would require new laws, which means support from the government and the Knesset.
Which Other Countries Are Exploring CBDCs?
- China: The digital yuan (e-CNY) has been in an extensive pilot for several years.
- European Union: The European Central Bank has launched a digital euro pilot with selected payment providers. It is aiming for a possible first issuance in 2029, if EU legislation is adopted.
- United States: The US has moved firmly in the opposite direction. A January 2025 executive order banned federal agencies from creating or promoting a CBDC, and Congress has since moved to bar the Federal Reserve from issuing one until the end of 2030.
What’s Next for the Digital Shekel?
After publishing the design, the Bank of Israel gathered public feedback and ran a consultation with technology experts and vendors. A final decision on whether to issue a digital shekel is not expected before the end of 2026. Even if the decision is yes, legislation would still be needed before a launch.
Final Thoughts
For the average person, a digital shekel could eventually mean faster, cheaper and more flexible payments. For now, it remains a carefully planned possibility rather than a reality, so it’s worth following how the project develops.
Would you be comfortable using a digital shekel instead of cash? Let us know your thoughts!