Home News Palestine monetary authority mulls digital currency as ‘political signal‘

Palestine monetary authority mulls digital currency as ‘political signal‘

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The Palestinian Monetary Authority is exploring the possibility of issuing a digital coin. Intending to strike at least a symbolic blow to monetary dependence on Israel.

Under agreements from the 1990s with Israel, the Palestinians agreed not to create their own currency. So their economy mainly uses the Israeli shekel, as well as the Jordanian dinar and the US dollar.

No matter how ridiculous it may sound, at the moment Palestine is literally swimming in shekels due to the impossibility of getting rid of the currency. One of Israel’s laws prohibits large-scale cash transactions, ostensibly to discourage money laundering.

Israel also limits the amount of shekels that Palestinian banks can transfer back to Israel on a monthly basis. As a result, they sometimes have to take out loans to cover foreign currency payments to third parties. And they stuck in a surplus of Israeli banknotes. In this case, digital currency can bail out the Palestinian monetary system and bring it autonomy.

According to the Governor of the Palestinian Monetary Authority Feras Milhem, there are currently two studies on cryptocurrencies and no decision has yet been made. But it hoped that the digital currency will eventually use for payment systems in the country. As well as for transactions with Israel and other states.

Experts believe that Palestine will not be able to create its own digital currency

Palestine has a weak economy and largely constrained by Israeli restrictions on the free flow of goods and people. It relies heavily on donor money and remittances from Israel.

Raja Khalidi, director of the Palestinian Institute for Economic Policy Research, said that “there is no macroeconomic environment that allows the Palestinian currency – digital or otherwise – to exist as a medium of exchange”. However, he added, issuing some kind of digital money could “send a political signal showing a clear manifestation of monetary autonomy from Israel”.

Palestinians are joining monetary authorities from Sweden to China in exploring the potential of national digital currencies. As declining use of banknotes and coins threatens to revolutionize traditional payment methods. The emergence of cryptocurrencies like Bitcoin has increased pressure on central banks. It is not yet clear if they will be able to provide a viable alternative.

Barry Topf, a former senior adviser to the Governor of the Bank of Israel, agreed that it was unlikely that the Palestinian digital currency would become a viable medium of exchange. “It will not replace the shekel, dinar or dollar. It definitely won’t be a store of value or a unit of account”. Meanwhile, the Palestinian private sector suffers from a lack of money due to the credit crisis. And the European Investment Bank has pledged $ 425 million in loans, which Milham wants to channel to small and medium-sized enterprises in the West Bank and Gaza Strip. Fearing that the money could end up in the hands of the ruling Hamas movement in Gaza, which the US and Israel consider a terrorist group, Milham said that all funds would be distributed by PMA-regulated banks.

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