by Nuno Menezes
Bitcoin or a ‘Palestinian Pound,’ a digital currency inspired by Satoshi Nakamoto’s innovation, could potentially be used to propel the independence and financial sovereignty of Palestine, as Azzam Shawwa announced at a European Bank for Reconstruction and Development meeting over May 9-11.
The unstable political and socio-economic situation in the Middle East has been a hindrance to the empowerment of Palestinians for many years. Palestinians have been forced to use several currencies in order to access wealth and be able to pay for services. Since they do not have any currency of their own they are required to use the euro, or the U.S. dollar, the Israeli shekel or the Jordanian dinar in their daily lives. This, of course, is not a viable economic option. However, bitcoin might solve this and become a game changer for Palestinians.
Reuters recently revealed that Palestinian officials could soon start developing its own digital-only currency, or even adopt bitcoin as its national currency. According to the head of the Palestine Monetary Authority (PMA), this is considered to be a move designed to safeguard against potential Israeli interference. Other options, such as keeping the status quo of using four currencies, or formally adopting one of them are also under consideration but according to the PMA representative said the digital route was the preferred one.
But it is unclear how the planned e-pound would skirt the 1994 Paris Protocol agreement which gave the PMA the functions of a central bank but without the ability to issue currency. The protocol recommended the use of the shekel and gave Israel an effective veto over a Palestinian currency.
The agreement and resulting violence lead to a restriction on the freedom of movement of people within the territory. Consequently, Palestinian Territories are very vulnerable to “fluctuations in the flow of international funds and the withholding of tax money, as practiced by Israel as a means to exert political pressure.”
Azzam Shawwa made this announcement during the annual meeting in Cyprus of the European Bank for Reconstruction and Development (EBRD). Shawwa told Reuters that the authority has been in a decade-long push to have a recognized central bank and the currency plans are part of a wider five-year strategy to be published before the end of the year. On its website, the PMA states it aims to become a “full-fledged and modern central bank” for an independent Palestine.
Azzam Shawwa, the Head of the PMA stated:
“That is something we would like to see; it will be called the Palestinian pound.”
There are practical reasons why Palestinians are starting to consider that a digital currency could be their best choice to be used as the main currency. Since the authority has no money-printing facilities of its own, the best option would be to undergo through the digital issuance of the currency in order to avoid being forced to print money elsewhere.
Also, a physical currency would be impractical, as confiscation could be enforced at the border with Israel, where a digital currency would allow greater financial permeability for the people of Palestine.
“If we print currency, to get it into the country you would always need clearance from the Israelis and that could be an obstacle. So that is why we don’t want to go into it. But it’s not only the currency, you have to see the economy also. Issuing (a currency) is something, but you also need the backbone of the currency; reserves, gold, oil and that is part of the business plan.”
The PMA received the functions of a central bank in 1994 with the Paris Protocol agreement but without the ability to issue currency. In this sense, it is not too clear how the planned e-pound would skirt the the protocol which recommended the use of the shekel and gave Israel an effective veto over a Palestinian currency. This is precisely what the PMA wants to avoid. The PMA wants to detach from the use of the Israeli shekel completely and feels that as a Nation, Palestine should have its own currency.
According to Shawwa, the PMA is already in the process of moving to a new purpose-built central bank which is being built in Ramallah. Apart from that, it seems that the Palestinian pound is some way off. Even though it is already taking the first step towards becoming the Palestinian National currency, Bitcoin can also become one of the solutions. However, the high fees as of late may make it unattractive. Otherwise, the PMA is looking to make it a bitcoin-style solution, but with limited control over money supply and ultimately, inflation.
During the meeting, the European Bank for Reconstruction and Development stated it would start investing in the West Bank and Gaza via donations. Amidst the growing use of digital currency, many governments are showing an interest in considering a digital currency as a potential option to be used as a national currency.
Digital currency is still a relatively recent technology, and after a few years of being used in the underground, governments are finally recognizing its potential. Right now, there are still very few countries planning to test its use, but in a couple of years, we will probably start seeing a lot of countries adopting its use.