Israel Postpones Digital Shekel Launch to Wait for Western Central Banks

Bank of Israel (BOI) has postponed the launch ofthe digital shekel until the European Central Bank (ECB) unveils its digitaleuro, Reuters reported. BOI will wait for major Western central banks to takethe first step in adopting central bank digital currencies (CBDCs).

Digital Shekel Debut

BOI's Deputy Governor Andrew Abir told the mediapublication: "We are all waiting for the first western central bank topull the trigger, which is almost certainly going to be the ECB. And then youmay see a rush of countries going forward with it."

As of March, 134 countries, encompassing 98% of theglobal economy, are exploring digital versions of their currencies. China leadswith advanced pilot programs, while the US Federal Reserve lags behind. TheBank of Israel initiated its exploration into CBDCs in 2017, aiming to enhanceits payments system.

The BOI's interest in a digital shekel intensified inNovember 2020. Collaborating with central banks from Hong Kong, Sweden, Norway,and the Bank for International Settlements. BOI has been testing its digital currency in an initiative termed the "Digital ShekelChallenge," which invites fintech and traditional financial companies toshowcase potential use cases.

Despite these efforts, the BOI is uncertain about theeventual launch of a digital shekel. The current experiment serves as an"action plan" to be implemented when deemed necessary andappropriate.

The ECB shares similar hesitations, with the potentialintroduction of a digital euro still uncertain. Europe's dependence oncross-border payment services from US giants like Visa and Mastercard adds tothe complexity.

Public Adoption Uncertainty

Abir highlighted the challenge of public adoption,stating that the concern is whether the public will adopt a digital currency.The BOI is conducting a behavioral study to understand the public willingnessto embrace a digital shekel.

Abir pointed out the gap between theoretical studiesand practical usage. He said that some studies are pushing people to use digital currency. However, he maintains that there should bea good set of use cases.

As the BOI waits for the ECB's move, the globalfinancial community remains keenly interested in how digital currencies willreshape economies and payment systems. The success of the digital euro couldpave the way for Israel's digital shekel and potentially revolutionize globalfinancial transactions.

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Bitcoin To $455,000: Expert Echoes Previous Halving Pattern

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Crypto-Terrorist Financing: Israel Seized Millions Linked to Iranian-Lebanese Groups

The Israeli government through a multi-agency collaboration has seized millions of dollars in cryptocurrency belonging to accounts allegedly linked to groups in Iran and Lebanon. According to the Associated Press, Israeli Defense Minister Yoav Gallant, explained that the accounts were used to fund the Quds Force, the special unit of Iran's paramilitary Islamic Revolutionary Guard Corps responsible for extraterritorial operations, and Hezbollah, a Lebanese political party and militant group supported by Iran.

Israel Slams Hezbollah and the Quds Force

Gallant further alleged that Hezbollah and the Quds Force, two organizations considered a major threat by the Israeli government, are deploying cryptocurrency to finance their activities. The Quds Force has long been accused of supporting and funding various militant groups, including Hezbollah.

The two groups have also been designated as terrorist organizations by the United States, with the European Union considering only Hezbollah's military wing as a terrorist organization. Gallant said the Western Asia country has now “effectively cut off” the flow of funds for terrorism activities through the accounts. He noted that the operation is the first crypto-related operation by Israel targeting both groups.

"Since the beginning of the year, Hezbollah, Quds Force and Syrian elements have used digital currencies in order to obtain in this manner funds from third parties, mainly money changers with whom they perpetrated unlawful transactions, which were used by the terrorist organizations for their ongoing activities," Gallant further explained in a statement released on Wednesday by the National Bureau for Counter Terror Financing of Israel.

The new operation is Israel’s latest move in the campaign against terrorism financing through the use of cryptocurrencies. Last month, Israeli authorities seized 189 Binance accounts allegedly been linked to Palestinian and Islamist terror groups since 2021.

In February last year, the country also confiscated 30 crypto wallets and 12 accounts it deemed connected to terrorism financing. The wallets were allegedly linked to Al Mutahadun, a currency exchange company based in the Gaza Strip. The exchange has been previously accused of providing financial support to the Hamas, a militant group that controls the Gaza Strip in Palestine.

Gallant noted that the success of the new operation serves as a warning to terror financiers that the country had the capacity to fish out culprits who hide behind blockchain-based transactions.

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Israel Turns to DAOs after Proposing Rules for Stablecoins, Crypto Investments

Israel is now looking into decentralised autonomous organisations (DAOs) in its latest efforts to bring the digital assets industry under its watch. DAOs are blockchain-based organisations that operate based on rules coded into smart contracts. Uniswap, Augur and MakerDAO are top examples of such organizations.

Israel Eyes DAO Regulation

On Wednesday, the Israeli Ministry of Finance announced the appointment of a multi-agency team tasked with recommending rules for the regulation of DAOs. The team will look at various areas of DAO regulation, including corporate status determination and taxation.

Regulating this type of organization will help “to create legal certainty, reduce risk factors in activity conducted through DAOs and realise the potential for the Israeli economy,” the ministry explained.

As part of efforts towards DAO regulation, the ministry has called on academics, civil society organizations and other industry stakeholders to submit proposals on various areas pertinent to the regulation of DAOs. Specifically, the ministry wants the public to submit materials on the nature of DAOs, their benefits over traditional corporations, the major risks they pose, as well as advantages and threats to the Israeli economy.

Additionally, the ministry is calling for submissions related to registration requirements for recognizing DAOs as legal entities, minority holder protection, application of existing financial rules to DAOs, and money laundering risks posed by DAO activities. The public has until September 9, 2023, to put forward their recommendations, the ministry noted.

Crypto Regulation in Israel

In recent years, Israel has sought to regulate the digital assets industry. Earlier this month, Israeli lawmakers conducted a preliminary reading for a new bill that proposes the exemption of foreigners from capital gains taxes; that is, taxes on profit made from their cryptocurrency activities.

In March, the Bank of Israel proposed rules for permitting stablecoin use in the country while managing risks and protecting investors. The apex monetary authority also called for public comments on the proposals.

A month earlier, the Israel Securities Authority (ISA) also published a proposal calling for an amendment to the applicability of the country’s securities laws to cryptocurrencies. The securities watchdog noted that while cryptocurrencies serve as a financial investment, they are not included in definitions found in the country’s laws.

Since August 2017, Israel has created a least three crypto-related committees to look into various areas of crypto regulation and adoption in the country. The first committee, which was established in August 2017, called for a balance between encouraging technological innovation and preserving the interests of the investing public.

Furthermore, while the second committee worked on rules for promoting and establishing rules for the digital asset markets in Israel, the third committee examined the ISA’s policy on investment products in digital assets.

Meanwhile, Israel is not missing in the global race towards a central bank digital currency (CBDC) launch. However, Finance Magnates reported that the Western Asia nation has tied the launch of its CBDC, the digital shekel, to similar moves by global economies such as the United States and the European Union.

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