Back

Digital versions of Yuan, Euro and Pound, so what? Ethereum-underpinned Shekel, now that’s news!

24.06.2021

We have all seen the central banks around the world pushing their pipe dream of launching a digital currency.

Largely, this has been misunderstood by many and when the first government-driven directive toward digital currency began, there was a widespread assumption that all of a sudden, the People’s Bank of China, one of the most illiberal government-operated central banks in the world, was adopting Bitcoin and other decentralized currencies.

This of course was not the case and never will be, and the reality is that China, along with the European Central Bank and potentially the Bank of England are all engaged in developing digital versions of existing sovereign currency, hence there could potentially be a digital Euro, digital Pound which is rather humorously being referred to as “Britcoin”, and a digital Yuan which the Chinese government has recently stated will be used internally in order to monitor capital usage rather than going international.

A central bank-issued version of Bitcoin there never was, and never will be, is the long and short of it, however when it comes to Israel’s interest in Ethereum, things are somewhat different.

Israel is also not known for being a very open economy, however today its central bank, the Bank of Israel, stated that it intends to use Ethereum technology to create a digital version of the national sovereign currency, the Shekel.

Yes, it is still not an actual untethered cryptocurrency, it is still a version of the Shekel, but in the case of Bank of Israel’s version of a digital currency, it does use the same underpinnings as untethered cryptocurrency Ethereum, which is very interesting indeed.

Currently the Bank of Israel is carrying out a trial of the digital Shekel internally, and has recently stated that it believes that the digital payment system could have a positive impact on the economy by simplifying payment processes while providing security to both parties in a transaction.

Even more interesting in a nation where no contactless transactions exist, Apple Pay is either blocked or severely restricted, and no chip-and-pin devices exist in point of sale terminals. Remember the old magnetic strip swiping of the 1990s? It’s still very much alive and well in Israel.

Perhaps even more interestingly, one of the most attractive aspects of Ethereum is its smart contract technology, which if harnessed properly can perform an entire host of legal, contract-related and financial transactions ranging from employment contracts to freelance work invoices, and Israel has a lot of freelancers.

Perhaps the Bank of Israel’s pilot could extend toward smart contract rollout, however that has not been mooted yet.

Whichever way it is looked at, many central banks in large economic blocs such as China, the US, Britain and the European Union are very much involved in creating digital versions of their currencies, largely to control their own markets, however Israel, which controls its own markets in a far stricter way than any Western country, may ironically use an Ethereum-underpinned digital currency to open its Shekel and the business ecosystem of Israel’s commercial world to greater and wider opportunities.