In a recent speech published on the central bank’s website, Bank of Israel deputy governor Andrew Abir challenged the traditional belief that central bank digital currency (CBDC) would have a negative impact on commercial banks.
Instead, he stated that the banks should be encouraged to compete with the CBDC. Abir noted that the Israeli banking sector has made progress in fostering competition, but there is still room for improvement.
As the central bank has raised interest rates to combat inflation, the banks have been slow to raise deposit rates. This has contributed to public criticism towards the banking system, but Abir believes that increasing competition in certain segments will help address this issue.
The planned design of the digital shekel, Israel’s proposed CBDC, includes the option for interest payments. Abir expressed confidence that this feature, combined with the transparency of the central bank, would gain public support for the digital shekel.
