The Israel central bank checked out trust problems and policy choices implicit in a very potential digital shekel, further as a number of the technical aspects of digital currency.
On Monday, the Bank of Israel free the results of a laboratory experiment that examined user privacy and the use of good contracts in payments. This was the central bank’s first technological experiment with a central bank digital currency (CBDC).
The first stage of the experiment sculptural the sale of a car within a two-tier system with an negotiator payment service provider. The bank said that the service provider completed grasp Your client (KYC)/Anti-Money laundering (AML) checks and provided the necessary blockchain addresses. A nonfungible token (NFT) was issued to indicate ownership of the car were not absence of a licensing authority to result the transfer. a wise contract exchanged the seller’s NFT and the buyer’s cash, with the seller retaining the right to cancel the dealings if the conditions on it, like the value of the car, exchanged met.
The experiment Drew attention to 2 questions. the primary was the amount of cash held in digital type. To avoid bank disintermediation — huge withdrawal of ancient shekels and their conversion to digital type, a daily limit was prompt that might be written into the good contract. The second question involved the good contract, itself. to reduce the chances of intentional or unintentional misuse of good contracts, it was prompt that the ability to write good contracts on the blockchain be limited to the payment service supplier, however the extent of management needed in this case remained undecided.
The first stage of the experiment additionally highlighted the requirement to determine identity so KYC/AML may be conducted through a centralized database. in the second stage, personal digital shekels and standard digital shekels were created on blockchain infrastructure in a very zero-knowledge-proof setting to look at limited privacy supported eCash technology in a kind of circumstances.
Besides strictly technical problems, it was noted that the level of privacy digital Israeli monetary unit users are going to be a policy issue. It seemingly falls somewhere between the whole anonymity {of cash|of cash} and therefore the lack of privacy characteristic of current electronic money transfers. Israel has been considering the issuance of a CBDC since 2017. It conducted a pilot test in 2021.
( Derek Andersen, Cointelegraph, 2022 )