The Palestinian Monetary Authority is considering issuing a digital currency, to the extent that it can give it at least some symbolic monetary independence from Israel.
The Palestinian Monetary Authority is studying the possible issuance of a digital currency, a measure that would allow it to deal at least a symbolic blow to Israel’s monetary independence.
Under their 1990s agreements with Israel, the Palestinians agreed not to immediately create their own currency and their economy uses mainly the Israeli shekel, along with the Jordanian dinar and the US dollar.
Palestinian banks are currently flooded with shekels due to an Israeli law banning large cash transactions, aimed at cracking down on money laundering. Israel also limits the number of shekels Palestinian banks can transfer to Israel on a monthly basis. As a result, they sometimes have to apply for loans to cover foreign currency payments to third parties and get caught up in an excess of Israeli banknotes. This could be one of the reasons why a digital currency would be attractive to the Palestinian monetary system.
There are two studies on cryptocurrencies underway and no decision has yet been made, but the hope is to use “digital currency” for payment systems in our country and hopefully with Israel and others to use them for to actual payments, “Palestinian Monetary Authority Governor Feras Milhem said. in an interview with Bloomberg Television.
However, it might not be feasible.
The Palestinian economy is intrinsically weak, significantly limited by Israeli restrictions on the free flow of goods and people. It depends heavily on donor money and remittances from Israel.
Raja Khalidi, director of the Palestinian Economic Policy Research Institute, said that “macroeconomic conditions do not exist to allow a Palestinian currency (digital or not) to exist as a means of exchange.”
However, he added, the issuance of some kind of digital money could “send a political signal to show the apparent appearance of Israel’s monetary autonomy.”
Palestinians join monetary authorities from Sweden to China to examine the potential of national digital currencies as declining use of banknotes and coins threatens to alternate traditional payment methods. The emergence of cryptocurrencies like Bitcoin has added to the pressure on central banks to ensure they have a viable alternative before unregulated payment forms take over.
Barry Topf, a former senior adviser to the governor of the Bank of Israel, agreed that a Palestinian digital currency was highly unlikely to be a true medium of exchange. “It will not replace the shekel, the lunch or the dollar. It will certainly not be a store of value or a unit of accounting. “
Meanwhile, the credit crunch has left the Palestinian private sector because of money and the European Investment Bank has pledged $ 425 million in loans Milhem wants to channel to small and medium-sized businesses in the West Bank and Gaza Strip. Because of concern, the money could end up in the hands of the Hamas movement in Gaza, considered a terrorist group by the US and Israel, Milhem said all funds will be distributed by WFP-regulated banks.
“Our banks apply very strict rules,” he said. “Implement the rules’ know your customer. ‘In that case we don’t care.’
–With the assistance of Alisa Odenheimer and Fadwa Hodali.