Andrew Abir, deputy governor of the Bank of Israel, recently noted that traditional cash, once a formidable contender in payment methods, has diminished in importance due to technological constraints in an increasingly digital financial landscape.

During his address at the "Engines of the Israeli Ecosystem" conference on April 16, Abir introduced a new testing ground, referred to as a sandbox, aimed at experimenting with a central bank digital currency known as the digital shekel. This API-based sandbox will enable financial institutions, fintech firms, and other stakeholders to explore and develop potential applications for the digital shekel.

Abir emphasized that CBDCs could serve as a catalyst for fostering greater competition within the banking sector, citing the digital shekel's adaptability to compete with other digital payment options that have overshadowed traditional cash. He highlighted the digital shekel's potential utility in digital and e-commerce transactions, a role not feasible for centrally issued cash.

Furthermore, the introduction of the digital shekel is expected to stimulate competition among third-party services operating on the new platform, with participants acting as Payment Service Providers or Additional Services Providers, thereby promoting innovation and diversity in digital shekel-based services.

The sandbox initiative is intended to provide insights for the Bank of Israel in designing a CBDC system capable of supporting various use cases developed by participants.

Despite these promising developments, the Bank of Israel has not definitively committed to launching a digital shekel as of April 2024. The bank's current stance is to prepare a feasible action plan for potential future implementation, considering associated costs and risks.

Nevertheless, the Bank of Israel has undertaken several initiatives related to the digital shekel, including discussions on its logical architecture based on the findings of "Project Sela" and explorations into retail CBDCs for cross-border payments in "Project Icebreaker."