Cash is expensive. And across the world, countries without currencies often have to pay huge premiums just to use another country’s money. But a new trend has emerging in the digital era; many of these countries are looking toward the crypto-realm for a solution.
In the years following the Oslo I Accord, signed in 1993, Palestine’s political system was implemented, the Palestine Monetary Authority (PMA) was created, Palestinians were issued passports, and finally, in 2015, the UN raised Palestine’s flag. But the country still lacks its own currency.
Since the termination of the British Mandate for Palestine, the country has used multiple currencies in different frequency depending on the region. Three main currencies are common throughout Palestine; the U.S. dollar and Jordanian dinar are most common in higher value purchases such as houses, land, or cars, while most day to day transactions will involve the new Israeli shekel (NIS). This is due to 1994’s Paris Protocol which gave Palestine a central bank, however without the capacity to issue its own currency, forcing a dependence on the Israeli economy.
The Protocol on Economic Relations, originally supposed to last only 5 years – but still in place today – is an agreement between the Palestine Liberation Organization and Israel. The protocol essentially merged the economies of Israel and Palestine, with Israel remaining in control. A key negotiation was a measure that which allowed Palestinians to continue work in Israel.
The protocol regulates taxes, labor, agriculture, and industry. Israel acts as Palestine’s trade conduit and dictates all taxes and VAT on goods imported through Israel. This system has created an advantage for Israel, with the country abusing the clearance system for political reasons, withholding revenue payments which severely impacted the Palestinian economy.
With no currency of its own, circulating and spending money in Palestine is not as easy as it may seem. Most stores do not accept credit or debit cards and withdrawing cash from 3 out of 4 of the country’s major banks will leave the recipient with Jordanian dinar which will then need to be converted to NIS.
Not only is the process complicated, but it is expensive. The official newspaper of the Palestine National Authority, Al-Hayat al-Jadida, explained that the country loses $1.6-billion every year due to its lack of its own national currency.
Because of the tremendous challenges involved with not having a currency of its own, Palestine has announced an initiative to create a currency inspired by bitcoin technology.
Early 2017, Azzam Shawwa, the Governor of Palestine Monetary Authority, announced the intention to develop a digital currency within the next 5 years.
Shawwa noted: “That is something we would like to see; It will be called the Palestinian pound.”
The PMA is still weighing its options. While creating its own cryptocurrency could be a promising fix, the authority is also looking to accepting up to 4 currencies, or adopting one as its primary. The complications with Israel and the inability to actually print its own money make the digital currency solution very appealing for the PMA.
“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,” said Shawwa.
As the Palestine Monetary Authority mulls over the idea of the Palestinian pound, it remains unclear of how it would impact the Paris Protocol, but it could provide the country with an option to forge its independence both in identity and on an economic level previously unobtainable.
While simply using bitcoin presents several challenges through its fees and the amount of time to process transactions, cryptocurrencies are quickly becoming a reasonable solution to difficult economic issues which countries without currencies are experiencing.
Max Keiser wrote in 2013: “The Palestinian economy is a multi-billion-dollar economy that unfortunately benefits mostly outsiders. But if Bitcoin were adopted as the official currency, Palestinians would be able to shape their own economic destiny and in so doing their sovereign destiny.”