The proposal underscores how many global CBDC projects are aligning around similar ideas, with an emerging consensus on key design issues such as anonymity, technical architecture and the roles of different ecosystem participants.

Israel's Model for the Digital Shekel

The Bank of Israel envisions the digital shekel as both a retail CBDC and a wholesale CBDC, aiming to serve everyday payment needs for individuals and businesses as well as financial institutions.

As with most other proposed CBDCs, private-sector Payment Service Providers (PSPs) will handle onboarding and customer-facing services, while the Bank of Israel will oversee issuance and system rules.

To enhance user privacy, there will be no centralized database of personally identifiable information. Only PSPs will hold user data, and certain transactions below specified limits may be made anonymously.

Global Convergence in CBDC Design

Having outlined a basic design for the digital shekel, the Bank of Israel joins central banks in China, the EU, Hong Kong and other nations that have moved on to a more detailed discussion of the technical architecture.

After years of exploring different possibilities, several shared principles have now emerged across different CBDC projects.

Two-Tier Model

All major CBDC projects have now landed on the two-tier model that envisages different roles for the central bank and private sector PSPs.

While early discussions around the technology floated the idea of central banks also issuing wallets, this idea never took off.

The two-tier model reflects longstanding norms in finance. With CBDCs, bank accounts are replaced by wallets, but the basic principle of the central bank minting currency while private banks administer day-to-day transactions remains the same.