The Chairman of the Bank of Israel, Professor Amir Yaron, who took part in the “Payments in the Age of Innovation” conference, gave an overview of the topic of stablecoins and touched upon the possibility of issuing them in Israel.
These are digital tokens whose purpose is to maintain a stable value relative to a known currency, currently mainly the dollar, behind which there is a structure that manages the assets that serve as collateral. Most of them operate on open blockchain networks, but in practice they function like a financial service in every respect, just in a new technological shell.
According to Professor Yaron, when considering the issuance of stablecoins, the emphasis should be on the following aspects: the ratio of reserves to the volume of the issue (a currency that guarantees a stable value must be backed one hundred percent by liquid reserves held in accounts separate from the current activities of the issuer), the quality of the collateral assets (for a stablecoin to fulfill its promise, the reserve assets must be very safe and very liquid, such that they can be realized even in times of tension without causing unnecessary losses), and the issue of interest payments (whether a stablecoin is simply a means of payment, a currency, or a wrapper for another financial product such as a deposit).
Yaron noted that along with private stablecoins, more central banks are considering issuing government-owned digital currency (CBDC). These are fundamentally different products, primarily because CBDC is an obligation of a central bank, not a private entity, and is therefore completely risk-free.
At the same time, the head of the Bank of Israel emphasized that although the issue of digital shekels in the CBDC format is being actively studied, no operational decisions have been made on this matter yet.