Israel tightens cash transactions to boost digital payments
Israeli citizens will be banned from paying out more than 15,000 shekels ($4,000) in cash
Israel has imposed further restrictions on the use of cash payments to promote the use of digital payments and combat criminal activity.
Israeli authorities ramp up limits on cash
Israelis will be prohibited from making cash payments of more than 6,000 shekels ($1,760) in business transactions. The rule will apply to loans, salaries, donations and other business-related payments. Citizens will also be banned from making cash payments of more than 15,000 shekels ($4,000) in personal transactions.
The regulation represents a ramping up of the restrictions imposed in 2019 that limited cash business transactions to 11,000 shekels and personal transactions to 50,000 shekels. Legislation banning citizens from holding more than 200,000 shekels ($58,660) in cash at home is expected in the near future.
Tamar Bracha, who is responsible for implementing the law on behalf of the Israel Tax Authority, told The Media Line: “We want the public to reduce the use of cash money. The goal is to reduce cash fluidity in the market, mainly because crime organisations tend to rely on cash. By limiting the use of it, criminal activity is much harder to carry out.”
Isreal continues to reseach a digital shekel
Israel has been at the forefront in promoting digital payments and the development of central bank digital currencies (CBDCs). In June, the Bank of Israel published the results of its first technological experiment with a CBDC. It examined the use of smart contracts, the role of user privacy and the role of Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations.
The nation’s central bank published a paper detailing the outcome of public consultations held to gather opinions from interested parties on CBDCs. The majority of the 33 respondents were enthusiastic about the project.
While payment firms may well be enthusiastic, popular enthusiasm for limits on the use of cash is less clear. Such limits and the promotion of CBDCs have been criticised in some quarters for reducing the privacy of individuals, allowing state institutions an exorbitant level of insight into the spending habits of citizens.
In contrat to Israel, the Bank of Japan recently announced that it will not pursue CBDCs. The Japanese central bank’s consultation found popular enthusiasm for private sector-based payment tools along with physical cash – and there was already a high level of financial inclusion across Japan’s population.