Israel wants to further digitize its monetary system and is tightening the thumbscrews for the use of cash. As can be seen from a communication from the national Tax Authority (ITA), new limits on the use of cash have been in force since August 1. Companies are now only allowed to make cash transactions in the amount of 6,000 shekels ($ 1,760). For individuals, the threshold is slightly higher at 15,000 shekels ($ 4,400).
There are exceptions, for example, for charities, religious institutions and Palestinians from the West Bank.
In addition, further measures are to be introduced in the future, in which, for example, the domestic storage of large sums of cash of over 200,000 shekels (58,660 US dollars) is to be banned.
The tightening follows a law that has been in force since January 2019. With this, Israel intends to take stronger action against financial crime. For example, Israeli authorities have repeatedly seized crypto accounts suspected of terrorist financing in the past. An ITA employee told the US news agency Media Line:
The goal is to limit the circulation of cash on the market, primarily because criminal organizations, as a rule, rely on it. By limiting its use, the conduct of criminal activities is significantly complicated.
Critics, however, complain that the amount of cash in circulation has increased in Israel since the law came into force.
Israel is Working on CBDC and Crypto Regulation
Meanwhile, the new law is in line with the plans of the Bank of Israel (BOI). The central bank has been working on its own CBDC for a long time. In May, a first concept of what a “digital shekel” could look like was unveiled. In June, a first field test followed in a small circle. A request from BTC-ECHO about the current state of development and to what extent the CBDC could completely replace its physical counterpart, the BOI has so far left unanswered.
The national monetary Authority is also working on a central bank digital currency in the neighbouring country of Palestine. However, the fragile political and economic situation leaves room for skepticism.
At the same time, Israel is working hard on a regulatory framework for crypto assets. It remains to be seen when implementation can be expected.