Not to be outdone by other regional economies in the Middle East, Israel has completed a test of a cryptocurrency that would create a sovereign digital currency. The Bank of Israel first mentioned the digital shekel project a couple of weeks ago, and it has reportedly yielded positive results.

According to the newspaper reportes, the digital shekel will be used to support the purchase of government bonds and government debt, as well as issuing and issuing digital currency. The bank reports that the digital shekel system is meant to compete with rival currencies in the Israeli market.

The system tested in this pilot program will enable the Bank of Israel to issue digital currency in an efficient and secure manner through internal systems. That means no need for third-party services. Instead, the digital shekel will be issued on the digital network provided by digital asset exchange G5S.

The digital shekel system is similar to other such systems currently in use in Israel, including Bitpesa and MyEtherWallet. All digital currencies have issues associated with them, but the digital shekel is an exception, meaning it can be minted into digital currency without any problem.

The Bank of Israel also remarked that the digital shekel will be highly regulated. The government will have full control over the blockchain.

Digital currencies will eventually become the main method of settlement in Israel and other parts of the world, as businesses are quick to take advantage of the rising popularity of cryptocurrency trading in the developing world. But the digital shekel system also offers a potential competitor for traditional currencies. If it has any hope of becoming a reality, banks in Israel will need to be ready for significant demand.

This article has been updated to reflect that digital shekels are not convertible into bank notes, and this mirrors the intent of similar projects such as the digital yuan in China, which has advanced to the level of internal circulation without the need to exchange tokens into coins or bills. The idea is to maximize the use of tokens so that they start replacing traditional legal tender.