The Digital Shekel Programme
The Bank of Israel's digital-shekel project is one of the more advanced central-bank digital currency (CBDC) programmes globally. The 2026 status is design-mature, decision-pending.
Central Banking · Bank of Israel · Updated June 28, 2026
The Bank of Israel has been studying the digital shekel — a central-bank digital currency (CBDC) for the Israeli economy — since at least 2017. The Digital Shekel Programme has advanced through multiple phases of design, technical proof-of-concept work, public consultation, and international coordination with peer central banks. The programme has not committed to issuance. The structural questions about payment-system architecture, financial-stability impact, and the relationship between a digital shekel and the broader Israeli banking system remain open. Israel is now positioned as one of the most thoroughly studied CBDC programmes globally, with the institutional ground prepared for a decision that has not been taken.
The Programme
The Bank of Israel established its first dedicated CBDC research effort in 2017 under the central-bank governance of Karnit Flug. The programme progressed under successive governors — Amir Yaron through 2024 and subsequently Boaz Lavi — with progressively more concrete technical and institutional architecture work.
The Bank of Israel Steering Committee on the Digital Shekel published its first major framework document in 2021, outlining design principles, motivations, and the open questions that any issuance decision would need to resolve. Subsequent technical publications have addressed payment-system integration, privacy architecture, monetary-policy implications, and the structural relationship between a digital shekel and the existing Israeli commercial banking system.
The programme has been deliberately structured as research-and-readiness rather than as a path to inevitable issuance. The Bank of Israel position has consistently held that the digital shekel may be issued if circumstances justify and that the central bank should be technically and institutionally ready to issue if a decision is taken, without committing to the decision in advance.
The Motivations
The Bank of Israel public materials identify four principal motivations for the Digital Shekel programme.
First, preserving central-bank money in retail payments. The structural decline of physical cash usage in Israel and globally creates the question of whether central-bank-issued money remains accessible to retail users in the digital era. A digital shekel would provide a central-bank-issued retail payment instrument as cash usage declines.
Second, supporting competition in payment services. The Israeli payment system has been concentrated around bank-issued payment instruments. A digital shekel could support a more competitive payment-services market by providing an open infrastructure on which non-bank payment providers could build retail services.
Third, preserving Israeli monetary sovereignty in the face of private digital-currency competition. The global proliferation of stablecoins, dollar-denominated digital payment instruments, and the broader cryptocurrency landscape creates the question of whether a central bank can maintain monetary control without offering its own digital alternative. A digital shekel is the policy answer.
Fourth, supporting cross-border payment efficiency. International CBDC coordination — particularly the Bank for International Settlements Innovation Hub work on cross-border CBDC interoperability — opens the possibility of more efficient cross-border payment infrastructure if peer central banks proceed in parallel.
The Design Architecture
The Bank of Israel design framework for the digital shekel runs through several structural decisions that any CBDC must make.
The retail-versus-wholesale question. The programme has focused on retail CBDC — a digital shekel accessible to general public users — rather than on the wholesale CBDC variant that would only serve interbank settlement. The retail focus is consistent with the policy motivations identified above.
The intermediated-versus-direct question. The framework operates on an intermediated model in which the Bank of Israel issues the digital shekel and commercial banks (and potentially non-bank payment providers) operate the customer-facing interface. The Bank of Israel does not propose to operate retail accounts directly. The intermediated model preserves the role of commercial banks in retail relationships while creating the new infrastructure layer.
The privacy architecture. The framework proposes a privacy model intermediate between full-cash anonymity and full-banking-disclosure. Small-value transactions would carry stronger privacy protection; larger transactions would carry full anti-money-laundering disclosure. The structural balance is one of the most contested questions in the design phase.
The technology platform. The Bank of Israel has explored both distributed-ledger and centralized-ledger architectures. The current direction appears to favour a centralized-ledger model with selected distributed-ledger features rather than a fully decentralized architecture. The technology platform decision interacts with the privacy architecture and the operational performance requirements.
The Financial-Stability Concern
The principal financial-stability concern around CBDC issuance is the question of whether the new instrument would draw deposits out of commercial banks during stress periods. If retail users perceive the digital shekel as safer than commercial-bank deposits during a banking crisis, the existence of the instrument could accelerate deposit flight in ways that would not be possible if only physical cash provided the alternative.
The Bank of Israel framework addresses this concern through proposed holding limits and tiered remuneration structures that make large digital-shekel holdings unattractive relative to commercial-bank deposits under normal conditions. The structural goal is to provide a payment instrument while not creating a structurally preferred savings instrument.
The Israeli commercial banking system has expressed real concern about the implications of CBDC issuance. The five-bank market structure is built around the deposit-and-credit cycle that CBDC issuance could partially disintermediate. The Bank of Israel has engaged with the commercial banks in extensive consultation on the design framework.
The International Context
The Bank of Israel programme operates in coordination with peer central banks. The European Central Bank's digital euro work, the Bank of England's digital pound work, the Bank of Canada's CBDC research, the Reserve Bank of Australia's eAUD work, and the Bank of Japan's digital yen research collectively constitute the cohort of advanced-economy central banks working on CBDC architecture.
None of the major advanced-economy central banks has committed to retail CBDC issuance. The People's Bank of China has issued the digital yuan at scale, providing the principal large-economy implementation reference. The European Central Bank is closest to a structured issuance decision among the advanced-economy cohort.
The Bank of Israel position is consistent with the cohort — readiness, research, technical capability, and political openness to issuance, without commitment.
The Stablecoin Pressure
The proliferation of dollar-denominated stablecoins — USDT, USDC, the broader cryptocurrency landscape — creates a parallel form of digital-payment instrument that competes with bank-issued digital payment. The Israeli market exposure to stablecoins is substantial relative to most jurisdictions, partly because of the depth of the Israeli cryptocurrency-and-fintech industry.
The Bank of Israel framework has identified stablecoin competition as one of the structural motivations for the digital shekel programme. If retail users adopt dollar-denominated stablecoins at scale, the Israeli monetary architecture faces a partial substitution that a digital shekel could address.
What 2026 Tracks
Three threads matter. First, the Bank of Israel timeline toward an issuance decision and the conditions under which the decision might be taken. Second, the international CBDC environment and whether peer central-bank decisions create pressure or coordination for Israeli action. Third, the broader Israeli payment-system evolution and whether private-sector alternatives produce the operational outcomes that would otherwise motivate digital-shekel issuance.
The Digital Shekel Programme is one of the most mature CBDC research efforts globally. The issuance decision has not been taken. The institutional ground is prepared.
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The Olam Editorial Team
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