Israel halts cash to encourage digital payments

Israeli authorities implemented further restrictions on cash payments to combat illegal activity and promote the use of digital payment methods.

Due to the Law for the Reduction in the Use of Cash, which came into effect in January 2019, businesses and consumers in Israel are no longer allowed to make payments in cash.

People and businesses are encouraged to use digital payments, making it easier for the government to track illegal activity, tax evasion, and money laundering in the country's black market and elsewhere.

According to the Israeli Central Bank, 6,000 New Israeli Shekels (NIS) for business transactions and 15,000 New Israeli Shekels (NIS) for personal transactions will be the new limit for cash payments effective August 1, 2022. Additional restrictions, such as a ban on storing more than NIS 200,000 shekels ($58,660) in cash in private residences, are expected shortly.

According to Tamar Bracha, the Israel Tax Authority's (ITA's) head of law enforcement, limiting the availability of cash will make criminal activity more difficult. As a result, "the goal is to reduce market cash fluidity, particularly because criminal organizations tend to rely on cash."

Some have interpreted it as a positive sign of the country's new limits on hard-cash transactions. According to Lark Davis, a crypto influencer with over a million followers on Twitter, Israel is neither the first nor the last country to impose such restrictions. According to the founder of Lyn Alden Investment Strategy, the trend "will probably continue to other countries in the future."

Cryptocurrency regulation and CBDCs

Central bank digital currencies (CDBCs) are also being explored in the region, with the country first considering a CBDC at the end of 2017. After conducting a public consultation in May, the Bank of Israel released the results of the responses, which indicated strong support for further research into CBDCs and how they would affect the payments market, financial and monetary stability, and legal and technological issues.

In June, the Bank of Israel revealed that it had conducted its first technological experiment with a CBDC, examining user privacy and the use of smart contracts in payments. In addition, a framework for regulating digital assets is being developed in the country.

According to Oz Finance's Jonathan Shek at this year's Israel Crypto Conference in May, Israel's financial regulators have prepared a comprehensive and holistic regulatory framework for digital assets.

Shek hinted that it would happen soon, but he didn't give a specific date, saying that the Israeli government wanted to encourage the development of the crypto industry in their country if it was done responsibly.