The Palestinian Monetary Authority is studying the possible issue of a digital currency, which helps the State Department to strike at least a symbolic blow to monetary independence from Israel.
B compatibility with the agreements of the 1990s With Israel, the Palestinians agreed not to create their own currency, so the economies of the countries use the Israeli shekel, to a lesser extent the Jordanian dinar and the US dollar.
Currently, Palestinian banks are clogged with shekels because of an Israeli law that prevents large transactions with cash and intended for combating money laundering. Israel also limits the number of shekels that Palestinian banks can transfer back to Israel every month.
As a result, sometimes they have to make loans to cover expenses in foreign currency to third parties, this explains the excess of Israeli banknotes. And this is one of the reasons why the digital currency is attractive for the monetary system of Palestine.
According to the governor of the Palestinian Monetary Authority, Feras Milhem, two investigations are currently being conducted into cryptocurrency, a decision has not yet been made, but there is hope that eventually the digital currency will be used “in the payment systems of the country and, hopefully, in Israel and other countries”.
However, this is hardly likely. The Palestinian economy is quite weak, it is significantly constrained by Israeli restrictions on the free flow of goods and is heavily dependent on remittances from Israel.
The director of the Palestinian Institute of Economic Policy Investigations, Raja Khalidi, noted that “there are no macroeconomic conditions that allow the Palestinian currency – digital or fiat exist as a medium of exchange.”