Palestinians are considering digital currency as a step towards monetary independence
The Palestinian Monetary Authority is examining the possibility of issuing your own digital currency. For the Palestinians, the minting of a national coin would be at least a symbolic step towards monetary independence from the State of Israel.
Digital currency to help Palestinians cope with Israeli restrictions
Palestinians are currently conducting two studies on digital currency. While a decision is pending, the intention is ultimately to use a digital coin “for payment systems in our country and hopefully with Israel and others for actual payments,” said Feras Milhem, governor of the Palestinian Monetary Authority (PMA). said Bloomberg Television.
A digital currency issued by the institution that would one day become the central bank of a Palestinian state could potentially give the Palestinian financial system a degree of monetary independence from Israel. In accordance with the agreements of the 1990s with the Israeli side, Palestinians do not have their own fiat money, but use the Israeli shekel as the de facto currency alongside the Jordanian dinar and the US dollar.
Due to various restrictions, including an Israeli law prohibiting large cash transactions and monthly restrictions on shekel transfers to Israel, Palestinian banks are now being flooded with Israeli cash. They often need to borrow to cover foreign currency payments to third parties, the report said. These are some of the reasons the Palestinian monetary system would potentially benefit from a sovereign digital currency.
Feasibility doubts cast shadows on Palestinian coins
With its research on the subject, the PMA joins dozens of central banks around the world who have investigated the possible issuance of central bank digital currency (CBDC) in response to cryptocurrencies and the declining use of banknotes and coins. These include the central banks of China, Russia, the United States, and the euro zone.
Palestine is a special case, however, as its economy is weakened and constrained by Israeli restrictions that impede the free movement of goods, capital and people. It also relies heavily on international donations and remittances from Israel. Therefore, some experts doubt the feasibility of a Palestinian digital currency.
According to Raja Khalidi, director of the Palestine Economic Policy Research Institute, the issue of digital money could “send a political signal to show the seeming semblance of monetary autonomy from Israel”. But Khalidi also thinks:
The macroeconomic conditions do not exist to allow a Palestinian currency – digital or otherwise – as a medium of exchange.
Khalidi’s concerns were shared by Barry Topf, the former senior adviser to the Governor of the Bank of Israel, who agreed that it was highly unlikely that a Palestinian digital currency would serve as a real medium of exchange. “It will not replace the shekel, the dinar, or the dollar. It will certainly not be a store of value or a unit of account, ”said the banker.
Do you think digital currency is a viable option for Palestinians? Do share your thoughts on the matter in the comments below.
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