Palestine Considers Digital Currency
There is plenty of cash sitting in banks in Gaza and the West Bank territories occupied by the Palestinian National Authority. So, why is the Palestinian Monetary Authority looking into a digital currency?
The region under the control of the PNA has been called the State of Palestine since 2013. It is a Fatah-controlled region as a consequence of the 1993-1995 Oslo Accords. The region has been controlled by Israel since the Six-Day war of 1967 despite the PNA’s attempts to gain recognition as an independent state.
Under accords agreed to between Israel and the Palestinians during the 1990s the Palestinians can’t create their own currency system. Their economy primarily uses the Israeli shekel, Jordanian dinar, and the U.S. dollar.
Israel manages the Palestinians’ taxes. The West Bank has been subject to a 14-years blockade that has brought its economy to near collapse, subjected to severe Israeli restrictions and enduring four wars since 2008. Gaza is under the jurisdiction of the Palestinian Authority, which has limited administrative powers.
According to a June 24 report by news outlet Aljazeera, “Palestinian banks are currently awash in shekels because of an Israeli law prohibiting large cash transactions, meant to crack down on money laundering. Israel also limits how many shekels Palestinian banks can transfer back into Israel monthly. As a result, they sometimes have to borrow to cover foreign exchange payments to third parties and are stuck with a glut of Israeli bank notes
Palestinian Monetary Authority Governor Feras Milhem said there are two cryptocurrency studies taking place to determine if perhaps a digital currency might resolve this problem. A cryptocurrency would be used “for payment systems in our country and hopefully with Israel and others to use for actual payments,” according to Milhem.
Milhem continued, “Our banks implement very strict rules. They implement ‘know your client’ rules. In this case we are not worried.”
There are serious questions if such a system is doable. Palestine Economic Policy Research Institute Director Raja Khalidi said, “The macroeconomic conditions don’t exist to allow a Palestinian currency – digital or otherwise – to exist as a means of exchange,” adding that such a monetary system would “send a political signal to show apparent appearance of monetary autonomy from Israel.”