Palestinians Plan Digital Currency Rollout

FinTech, Innovation, Investing, News, Regulation | May 15, 2017 By:

The Palestinian government is reportedly looking to create its own digital currency within the next five years. The new currency is designed to safeguard against alleged Israeli interference with its monetary system.

At present, Palestinians in the West Bank and Gaza use the Euro, US dollar, Israeli shekel and Jordanian dinar.

Azzam Shawwa, Governor of the Palestine Monetary Authority (PMA), revealed the plans in comments to Reuters at the European Bank for Reconstruction and Development (EBRD) annual gathering in Cyprus. Shawwa said that the limited control that the current system gives Palestinian authorities over supply and inflation has led to bitcoin-style solutions being considered. “That is something we would like to see. It will be called the Palestinian pound,” he said.

Shawwa also stated that the digital currency might be backed by some kind of commodity, mentioning “reserves, gold, oil” as possible assets to underlie the currency.

The move to a Palestinian pound would be in line with the PMA’s stated goals on its website, which says that it aims to become a “full-fledged and modern central bank for an independent Palestine.”

The ease of creating a digital currency, compared to printing banknotes, may make this project successful in the conflict-ridden region. However, there are concerns about the 1994 Paris Protocol Agreement, which has effectively revoked the monetary authority’s power to print its own currency.

That agreement also recommended the use of Israel’s shekel throughout Palestine, and provided Israel with the power to basically veto the introduction of any proposed Palestinian money. As Shawwa explains, those controls are something that Palestine hopes to negate by choosing digital currency over printed money.

“If we print currency, to get it into the country, you would always need clearance from the Israelis and that could be an obstacle,” Shawwa said. “So that is why we don’t want to go into it.”