Palestine’s new Prime Minister, Mohammad Shtayyeh, says his government is developing a “digital and encrypted currency” to help it surmount economic obstacles imposed by Israel.
“We are going to go to the digital and encrypted currency, and we will be the pioneers of everything. The occupation can not block us,” Prime Minister Shtayyeh reportedly said in a speech at the opening of the Palestinian Center for Emergency Response in Ramallah.
Shtayyeh did not provide many other details, nor did he furnish a timeline for the roll-out of the promised currency.
According to Al Monitor, the Paris Protocol agreement signed by the Palestinian Liberation Organization (PLO) and Isreal in April 1994 gave the Palestinian Monetary Authority (PMA) the powers of a central bank, but did not grant it the right to issue a currency.
The protocol reportedly obliged the Palestinian authority to use the shekel, “as means of payment for all purposes including official transactions,” and since it was signed, Palestinians have been transacting using a combination of Israeli shekels, US dollars and Jordanian dinars.
Obligations outlined in the Paris Protocol suggest one of many problems implied by the proposed sovereign cryptocurrency for Palestine, says economic and social sciences professor at Najah University in Nablus, Bakr Shtayyeh.
Crypto advocacy across the planet shows shades of technocratic utopianism, whereby technologies are believed to have the capacity to overcome complex social (and political) problems.
This is the first fault in the reasoning informing Palestine’s bid for a sovereign crypto, according to Professor Shtayyeh:
“If Palestine has its own currency, will it be able to prevent Israel from withholding tax clearance funds or controlling crossings and the movement of exports and imports? Will Palestine be able to conclude direct commercial deals with neighboring countries without the imported or exported goods passing through Israeli commercial ports? The problem of the Palestinian economy is not the currency but rather a complex economic and political reliance on Israel.”
At present, the Palestinian economy is too heavily wrapped up with the shekel, he said:
“I doubt this would achieve any economic gain…There are 170,000 Palestinians working in Israel who earn their salaries in the Israeli shekel. Add to this, 80% of the trade exchanges with Israel are in shekels. Israel won’t accept dealing with another currency, and the shekel surplus predicament in Palestine will remain unchanged.”
Professor Shtayyeh also said that Palestine would need to mature its economy and establish better trade relationships in order to ensure markets for the crypto.
Another professor, Noureddine Abu al-Rab at the Arab American University in Jenin, doubted whether the current Palestinian government has the wherewithal to manage its own currency reserves:
“The PA government must gain the people’s confidence, protect its currency and maintain the stability of its value. This is very difficult, as the government currently has no hard currency to support a cryptocurrency.”
Professor Shtayyeh added that ongoing conflict with Israel would badly effect the crypto’s value:
“Political tension with Israel will directly lead to a devaluation of this currency, which would make it difficult for it to gain the confidence of traders.”
Professor Shtayyeh also wonders if the current Palestinian government understands the cyber risks of a national cryptocurrency:
“Is the PA capable of repelling cyberattacks and cyberpiracy that Israel could launch against the Palestinian cryptocurrency, especially since Israel is advanced in the field of software development?”
Rather than focus on a currency that might be at best “symbolic” for the time being, Professor Shtayyeh advised that the government focus more on developing economic production in the region:
“Palestine needs an economic base capable of embracing this currency by promoting its production in all its forms, especially as Palestine is a consumer country and production is what strengthens the value of a currency. … We must not rush into a decision that the government may regret later.”
Saifedean Ammous, a Palestinian-born economics professor and author of The Bitcoin Standard, has advocated exclusive use of bitcoin as a means of exiting repressive financial systems.