Israel and Palestine explore cryptocurrency

Two opposing states, Israel and Palestine, are researching cryptocurrencies at the same time – for different reasons.

Palestine and Israel may not be closer to peace, but the two countries have at least one thing in common: Both look to digital currencies.

Bloomberg reported Thursday that the Palestinian Monetary Authority has launched two studies on the feasibility of a Palestinian digital currency.

The Palestinian digital currency will reduce its dependence on the Israeli shekel, which the country has relied on since the signing of the Paris Protocol on Economic Relations with Israel in 1994.

As part of the deal, Palestine agreed not to issue its own currency. The protocol is to last five years and is signed with the impression that the states are moving towards a two-state solution.

Almost three decades later, the negotiations have made little headway. Large parts of Palestine are under military blockade, the Palestinian economy remains dependent on the Israeli shekel, the US dollar and the Jordanian dinar.

Government-backed digital currencies, also known as central bank digital currencies (CBDCs), don’t necessarily rely on blockchain but can be inspired by the distributed ledger technology that has been popular.

Raja Khalidi, director of the Palestine Economic Policy Research Institute, told Bloomberg:

“The macroeconomic conditions do not allow a Palestinian currency – digital or otherwise – to exist as a medium of exchange.”

However, if Palestine were to issue its own currency, this gesture would “send out a political signal that indicates the emergence of monetary autonomy for Israel.“

Meanwhile, Israel is also researching its own digital currency – and it has gone much further in its research. In May it was determined that the digital shekel could help its economy.

This week the Central Bank of Israel announced that the state is testing the Ethereum blockchain for its own CBDC.

While two rival governments in Jerusalem are researching the digital currencies of the central banks, extremists in Gaza are using decentralized cryptocurrencies to completely “break” the monetary system.

Hamas became the de facto government agency in the Gaza Strip after the conflict broke out in 2007. Although widely viewed as a terrorist organization, it still oversees the education and health of its people in Palestine in war-torn areas. The organization reported an increase in Bitcoin donations during the two-week conflict with Israel last month.

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