Israel and Palestine Are Exploring Digital Currencies
Palestine and Israel may be no closer to peace, but the two states have at least one thing in common: they are both looking into digital currencies.
Bloomberg reported on Thursday that the Palestinian Monetary Authority has launched two studies into the feasibility of a Palestinian digital currency.
Palestine’s digital currency would reduce its dependence on the Israeli shekel, on which it has relied since signing the 1994 Paris Protocol on Economic Relations with Israel.
As part of the deal, Palestine agreed not to issue its own currency. The Protocol was meant to last for five years, and was signed with the impression that the states would move toward a two-state solution.
Almost three decades later, little has progressed in the talks. A large stretch of Palestine is under military blockade, and the Palestinian economy still relies on the Israeli shekel, the US dollar and the Jordanian dinar.
State-backed digital currencies, also known as central bank digital currencies (CBDCs) , do not necessarily rely on blockchain, but may take inspiration from the distributed ledger technology it popularized.
Raja Khalidi, the director of the Palestine Economic Policy Research Institute, told Bloomberg that “the macroeconomic conditions don’t exist to allow a Palestinian currency—digital or otherwise—to exist as a means of exchange.”
However, should Palestine issue its own currency, the gesture would “send a political signal to show appearance of monetary autonomy from Israel.”
Meanwhile, in West Jerusalem
Israel is also exploring its digital currency—and it is a lot further along in its research. In May, the state concluded that a digital shekel could help its economy.
This week, the Bank of Israel said that the state is trialing the Ethereum blockchain for its own CBDC.
While the two rival authorities in Jerusalem are exploring central bank digital currencies, extremists in Gaza have been using decentralized cryptocurrencies to circumvent the state entirely.
Hamas became the de facto governing authority in Gaza after conflict broke out in 2007. Though widely considered a terrorist organization, it oversees the education and health of Palestinians in the war-torn territory. The organization reported a surge in Bitcoin donations during the two-week conflict with Israel last month.
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