Both states are investigating crypto at the same time, but for different reasons.
Although Palestine and Israel are no closer to peace, they do have one thing in common: they are both researching digital currency.
According to Bloomberg, the Palestinian Monetary Authority has initiated two feasibility studies exploring the creation of a Palestinian digital currency.
Palestine’s digital currency would diminish the country’s reliance on the Israeli shekel, which it has used since the Paris Protocol on Economic Relations with Israel was signed in 1994.
Palestine pledged not to issue its own currency as part of the agreement. The Protocol was signed with the expectation that the states would work toward a two-state solution over the next five years.
The negotiations haven’t developed much in nearly three decades. The Palestinian economy still relies on the Israeli shekel, the US dollar, and the Jordanian dinar, and a substantial portion of Palestine remains under military embargo.
State-backed digital currencies, also known as central bank digital currencies (CBDCs), aren’t always based on blockchain, but they may be inspired by the distributed ledger technology that it popularized.
“The macroeconomic conditions do not exist to allow a Palestinian currency—digital or otherwise—to emerge as a means of exchange,” Raja Khalidi, director of the Palestine Economic Policy Research Institute, told Bloomberg.
Should Palestine, on the other hand, establish its own currency, it would “send a political signal to exhibit semblance of monetary autonomy from Israel.”
Meanwhile, Israel is investigating its digital money in West Jerusalem, and it is much further advanced in its studies. The state decided in May that a digital shekel would be beneficial to its economy.
The Bank of Israel said this week that it is testing Ethereum for its own CBDC.
While the two opposing governments in Jerusalem investigate central bank digital currencies, radicals in Gaza have used decentralized cryptocurrency to completely bypass the government.
After the battle in Gaza erupted in 2007, Hamas established itself as the de facto ruler. Despite being widely regarded as a terrorist group, it is in charge of Palestinian education and health in the conflict-torn territory.
During last month’s two-week confrontation with Israel, the organization saw an increase in Bitcoin donations.