Israel's Central Bank is Launching the "Digital Shekel Challenge" (CBDC)

I'll be presenting this, and many more CBDC insights on my keynote next week at BTC Prague

The Central Bank of Israel is launching the "Digital Shekel Challenge" - a technological challenge for private sector financial organizations, developers & startups to implement real life use cases for Israel's CBDC.

Let's break it down >>

1. The challenge will last a few months and a panel of judges, inc. a BIS representative will receive the deliverables in the end of Sep. 2024.
   Read more about the challenge here (use google translate).

   

2. This is a wonderful demonstration of PPP - Public Private Partnership which is the next step in implementing state/gov/global agendas by the private sector. It is the control & incentive structure that works time after time.

   

3. The Bank of Israel is providing developers with a set of API's to their core CBDC code, which is based on "Sela Project" - a pilot CBDC project developed by Israel and BIS Hub. Many more details on Sela in this thread.

   

4. Note the examples from the video: CBDC will be used to receive salaries, allowances, taxation, physical & online purchases etc.

   

5. A common lie in the CBDC messaging doc of all central banks is the narrative that CBDC is your digital cash. It is - in the fiat sense of things, and it isn't - because your privacy held cash is abolished with CBDC.

   

6. An interesting use case example from the Digital Shekel challenge document, reveals the exact API function in the CBDC code that enables DISABLING or FREEZING wallets.

   How convenient to use a "parental control" use case, while in reality there's no problem to use this for ANY wallet, and ANY time the state/gov/central bank/bank/financial institution decides to or is instructed to do so:
   "5.1 Children's wallet supervised by a parent - the possibility of connecting secondary wallets to a central wallet: Main ("OpenSubWallet") can support the business need of linked children's wallets to a main wallet (for example, the parent's), to allow the parent to monitor the child's sub-wallet, decide to freeze ("Freeze") or temporarily disable ("Disable") the activity of the wallet".

   

7. Pay attention to the architecture design manifested in this "digital shekel challenge".

   It reveals how central banks will implement CBDCs, in a 2-tier system.

   Central banks will act as the CBDC issuer - lending CBDC to financial institutions in the same way Fiat is created and lent today, and PSPs (Payment Service Providers) will be the ones to implement, manage, and transact with end-users, and then settle with the central bank.

   This preferred architecture was announced by the Israeli central bank in March 2024 in this document:
   "The conclusion in the paper is that the optimal model is an indirect distribution model, in which the Bank of Israel will distribute digital shekels to the institutions that manage current accounts, and these will support the distribution to the end users; this model has several advantages; in particular, it supports better performance of the loading operations and redemption, and it is a step in the direction of a multi-purpose digital currency, because the use of the same system by both financial institutions and end users can pave the way for a system that will support both wholesale and retail uses."

   

Israel will keep developing its CBDC abilities in a race to be “pioneers” in one more area. I’ll keep watching and keep you updated.

►► I'll be presenting this, and many more insights into CBDC vs. Bitcoin next week on my keynote at BTC Prague.

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