The Finance Ministry and Bank of Israel are considering issuing a digital currency. The digital shekel would record every transaction by mobile phone and make it more difficult to evade taxation, according to a finance official who spoke to The Jerusalem Post on condition of anonymity.
“You can imagine that instead of giving you a piece of paper saying the Bank of Israel on it, I can send you a piece of digital code that was issued by a central bank,” the official said.
It is unclear where the digital wallet would be located – either in a Bank of Israel account or on your mobile phone. And if somebody stole your phone, what would happen to your digital wallet?
In order to issue a state cryptocurrency, the Bank of Israel’s plans would need to be approved by the Knesset, the finance official added.
“There’s a lot that people need to think about before going through with this reform,” the official said. “We’re looking at the legal, financial, regulatory and money- laundering sides of this.”
Unlike Bitcoin (TIKER: BTC.EXANTE), where the set number of Bitcoins is fixed, sovereign governments can print and issue however much state currency they desire. That hypothetically makes Bitcoins more resistant to inflationary pressure – similar to gold – in terms of store value.