Bank of Israel deputy governor confirms digital shekel pilot is underway

Despite the pilot, the central bank’s deputy governor said he was apprehensive about launching a full-scale CBDC in Israel, and referred to Bitcoin as a “pyramid scam.”

The Bank of Israel has reportedly already issued a central bank digital currency through a pilot test of a digital shekel.

According to a Monday report from the Jerusalem Post, Bank of Israel deputy governor, Andrew Abir, said the financial institution had started to conduct a pilot program for a digital shekel. Speaking at a conference of the Fair Value Forum of IDC Herzliya, Abir added that he was not optimistic about the bank issuing a central bank digital currency, or CBDC, despite the fact he confirmed a pilot test was underway.

“I had previously estimated that the chance of having a CBDC within five years is 20%,” said Abir. “My estimate has increased a bit in the last year, mainly because other countries are advancing with it too, but still there is less than a 50% chance.”

The Bank of Israel has made no formal announcement on its website regarding the issuance of a digital shekel at the time of publication. Last month, the financial institution said it was preparing an action plan to explore the benefits of a CBDC on the Israeli economy, adding it would be prepared to do so should the benefits “outweigh the costs and potential risks.”

Related: Israel’s central bank floats possible digital shekel with new action plan

At the time, the central bank said it may consider issuing a CBDC if such meets the needs of the future digital economy and provides more efficient cross-border payments. Bank of Israel also hopes to reduce the use of cash and ensure the public can make payments with “a certain level of privacy.”

“The option for a CBDC is still being examined, and when we made our statement last month, it was not to say what we are doing, but rather to share what we do not know and receive feedback from the public,” said the deputy governor. He added that the country’s banks “will still have an important part in the entire payment system” following any potential rollout of a digital shekel.

Despite his seeming willingness to eventually integrate a CBDC in the country’s economy, Abir criticized Bitcoin (BTC) as a means of paymen:

“What we are talking about is a payment system. Bitcoin is not a payment system, and it is not a currency. In the best situation, it is a financial asset, and in the worst case, it is a pyramid scam.”

Israel’s central bank begin exploring the introduction of a CBDC four years ago with the establishment of an interdepartmental group tasked with exploring the matter. In 2018, the team recommended against the Bank of Israel issuing a digital currency, saying “no advanced economy has yet issued digital currency for broad use.”

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MasterCard announces support for crypto on its network

MasterCard will allow its almost one billion users to spend cryptocurrencies at more 30 million merchants, although it hasn’t specified which coins will be supported.

MasterCard has announced plans to support cryptocurrencies in 2021, paving the way for its nearly one billion users to spend digital assets at more than 30 million merchants.

The firm believes this may open merchants up to new customers and build loyalty with existing customers who are already migrating to digital assets over traditional fiat options.

“It’s about choice. MasterCard isn’t here to recommend you start using cryptocurrencies. But we are here to enable customers, merchants and businesses to move digital value”

While the global payments giant noted it is planning to support stablecoins due to their “reliability and security,” Mastercard declined to name any specific cryptocurrencies it will integrate.

However, Mastercard offered four core criteria by which it will be assessing prospective assets: robust consumer protections including consumer privacy and security, strict KYC compliance, adherence to local laws and regulations, and stability as a means of payment.

MasterCard also noted it is “actively engaging with several major central banks around the world” to support central bank digital currency initiatives, or CBDCs.

Last year, the firm released a “virtual sandbox” tool to demonstrate how a CBDC can be used to settle consumer purchases using MasterCard’s infrastructure.

MasterCard’s announcement also reported increasing demand for digital assets among its customers, noting that many users have been buying crypto assets with their MasterCards amid the current bull market.

“Digital assets are becoming a more important part of the payments world,” MasterCard concluded.

“We are here to enable customers, merchants and businesses to move digital value — traditional or crypto — however they want. It should be your choice, it’s your money.”

MasterCard already devoted significant resources into exploring distributed ledger technology, with the company currently holding 89 blockchain patents while a further 285 applications are pending.

The payments provider has engaged in crypto payments for some time now, partnering with Wirex and BitPay to create crypto cards, although no cryptocurrencies moved through MasterCard’s network.

MasterCard’s announcement is the latest of a series of institutional adoption of cryptocurrencies that have come in the last few weeks. This week Tesla announced a purchase of $1.5 billion Bitcoin from its cash reserve adding that it will soon accept Bitcoin payments for its cars.

Last week, PayPal doubled down on crypto announcing that it will offer crypto payments for its 26 million merchants after its limited crypto trading services “exceeded expectations.”

One week prior to this, Visa chairman and CEO Al Kelly reaffirmed its commitment to crypto payments and onramps during its Q1 earnings call.

Speculation on which other tech firms will be the next to enter the cryptocurrency rabbit-hole has also started emerging, with financial services provider RBC Capital Markets stating that Apple should follow in Tesla’s footsteps. RBC analyst Mitch Steves wrote to clients that developing a crypto exchange into the Apple Wallet would create a sizeable new market for growth.

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US Federal Reserve Seeking Manager to Research CBDCs and Stablecoins

US Federal Reserve Seeking Manager to Research on CBDCs and StablecoinsThe U.S. Federal Reserve (Fed) has posted a job advertisement that seeks to hire a role related to stablecoins and central bank digital currencies (CBDC). The Fed is looking for a research manager to join its team to assess the “benefits and risks” of digital assets. The Role Is Part of the Fed’s Digital Innovation […]
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Cryptocurrency makes World Economic Forum’s Davos Agenda

Sessions devoted to “resetting digital currencies” are scheduled at this week’s Davos Agenda.

The World Economic Forum’s upcoming Davos Agenda will feature two separate sessions on cryptocurrency, offering another compelling sign that digital assets have permeated mainstream consciousness. 

The sessions, titled Resetting Digital Currencies, will be held on Monday and Thursday. The first session will feature five public speakers, including Bank of England Governor Andrew Bailey and Hikmet Ersek, president and CEO of Western Union.

Thursday’s group features four speakers, including Tharman Shanmugaratnam, a senior minister for the government of Singapore, and Zhu Min, chairman of the Beijing-based National Institute of Financial Research.

“COVID-19 has accelerated the long-term shift from cash,” reads the prospectus for both sessions. “Meanwhile, central bank digital currencies are emerging, potentially transforming how people use money worldwide.”

It continues:

“What policies, practices and partnerships are needed to leverage the opportunities posed by the rise of digital currencies?”

Davos Agenda is a five-day summit featuring some of the world’s leading figures in finance and government. The cryptocurrency series falls under the summit’s “Fairer Economies” theme. Other themes include “Tech for Good,” “How to Save the Planet” and “Healthy Futures.”

The World Economic Forum is devoting more resources to understanding blockchain technology and cryptocurrency. The Geneva-based organization has even created a cryptocurrency working group, which only last month published its inaugural review focusing on the various use cases for digital assets “beyond price and speculation.”

The Forum’s research has cited blockchain technology as a key driver of “sustainable digital finance.” Blockchain and smart contract capability, the Forum’s researchers argue, can unlock “hidden values of legacy digital systems.”

Central bank digital currencies, or CBDCs, are one area of research the Forum has delved into over the past 18 months. In Jan 2020, the Forum announced it had developed a framework to help banks “evaluate, design and potentially deploy CBDC.” The framework was developed in conjunction with over 40 central banks, financial institutions and academic researchers.

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IMF Says Only 23% of Central Banks Can Legally Issue Digital Currencies

IMF Says Only 23% of Central Banks Can Legally Issue Digital CurrenciesResearchers at the International Monetary Fund (IMF) have examined the central bank laws of 174 IMF members to answer the question of whether a digital currency is really money. They found that of all the central banks studied, only about 23%, or 40 central banks, “are legally allowed to issue digital currencies.” IMF Explores if […]
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