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The Palestinian Monetary Authority is considering issuing digital currency, at least in a move that could give it symbolic monetary independence from Israel.
By Bloomberg
The Palestinian Monetary Authority is examining the possible issuance of a digital currency, a move that would allow it to deliver at least a symbolic blow to Israel’s monetary independence.
As agreed with Israel in the 1990s, the Palestinians agreed not to create their own currency and their economy mainly uses the Israeli shekel, along with the Jordanian dinar and the US dollar.
Palestinian banks are now in shekel because of a law banning large cash transactions to launder money laundering. Israel also limits how many shekels Palestinian banks can transfer to Israel each month. As a result, they sometimes have to take out a loan to pay third parties in exchange, and are stuck with the tightness of Israeli banknotes. That could be one of the reasons digital currency is attractive to the Palestinian monetary system.
Two investigations into the cryptocurrency are underway and no decision has yet been made, but hope is finally to use digital currency “for our country’s payment systems and, fortunately, for real payments with Israel and others,” Palestinian Monetary Authority governor Feras Milhem told Bloomberg Television in conversation.
It may not be feasible, however.
The Palestinian economy is inherently weak, with Israelis severely restricted by the restrictions on the free movement of goods and people. It is based on donor money and Israeli shipments.
Raja Khalidi, director of the Palestinian Institute for Economic Policy Research, said that “macroeconomic conditions do not exist for a Palestinian currency (digital or otherwise) to exist as a means of exchange.”
However, he added that the issuance of some kind of digital money “could send a political signal to show that Israel has the appearance of monetary autonomy”.
Palestinians are joining forces with Swedish and Chinese currency authorities to explore the potential of national digital currencies as declining use of banknotes and coins threatens to overhaul traditional payment methods. The emergence of cryptocurrencies like Bitcoin has increased pressure on central banks to take a viable alternative before taking unregulated payment forms.
Barry Topf, a former senior adviser to the governor of the Bank of Israel, admitted that it was very difficult for the digital currency of Palestine to be a means of real exchange. “It won’t replace a shekel, a dinar or a dollar. It will certainly not be a value warehouse or an accounting unit. “
The credit crunch has hurt the Palestinian private sector, meanwhile, and the European Investment Bank has pledged $ 425 million in loans to Milhem for small and medium-sized enterprises in the West Bank and Gaza Strip. Concerned that the money could remain in the hands of the Hamas-ruled Hamas movement, which the U.S. and Israel consider a terrorist group, Milhem said all funds will be distributed by WFP-regulated banks.
“Our banks set very strict rules,” he said. They set the “know your customer” rules. We are not concerned about this case. “
–With the help of Alisa Odenheimer and Fadwa Hodali.
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