Proposal to Abolish 200 Shekel Notes Faces Scrutiny from Bank of Israel
Introduction
A recent proposal to abolish the 200 shekel banknotes has sparked intense debate in Israel, primarily aimed at combatting the underground economy, increasing tax revenues, and disrupting criminal activities. This initiative, spearheaded by a group of experts, emerged in September 2024 and gained the attention of various stakeholders, including the Tax Authority and the Mstarty Laundering Authority. However, it has been met with considerable resistance from the Bank of Israel.
Current Status of 200 Shekel Notes
Following a recent request from Minister of Foreign Affairs Gideon Sa’ar to eliminate older series of 200 shekel notes frequently used in Gaza, the Bank of Israel has clarified that at least the new 200 shekel notes are expected to remain in circulation. The situation highlights ongoing concerns about the use of currency in Gaza and its implications for Hamas’ financial power.
Background on the Proposal
The proposal aimed to enable citizens to “dispose” of their 200 shekel notes without facing tax consequences on their gains, effectively rendering the notes valueless as they would be banned from use. Despite the proposal’s intent to reduce cash transactions and curb the black market, the resistance from the Bank of Israel has been unwavering.
The central bank maintained that the justification for abolishing the notes has not met the required professional standards. Additionally, it emphasized that the decision to withdraw currency from circulation rests solely with the Governor of the Bank of Israel. Discussions among officials, including Prime Minister Benjamin Netanyahu’s consultations, have not yielded any definitive decisions regarding the proposal.
Public Sentiment and Behavioral Changes
Public response to the proposal has led to a notable shift in the circulation of 200 shekel notes. Between September 2024 and February 2025, the number of these notes in circulation decreased by 7%, while the number of 100 shekel notes increased. This marks a significant deviation from recent trends that showed a preference for holding larger denominations.
Minister Sa’ar’s Intervention
Gideon Sa’ar has intervened in the matter, highlighting that a substantial quantity of old 200 shekel notes is under Hamas control in Gaza. He has called for an immediate push to revoke the legal status of certain series of these notes in an effort to undermine Hamas’ financial capabilities. Sa’ar stated, “We must at least advance the cancellation of several series of 200 shekel notes known to have entered the Gaza Strip to effectively diminish Hamas’s resources.”
Bank of Israel’s Position
In a recent statement, the Bank of Israel reinforced that there is insufficient professional justification for canceling any specific banknote series. It has noted that various proposals presented by different parties do not meet the necessary professional criteria and have not been formally submitted for consideration. Consequently, the Bank does not plan to exercise its authority to abolish any banknotes or alter the composition of the currency in circulation.
Expert Opinions
Experts in the field have differing views regarding the approach to the potential abolition of the 200 shekel notes. Dr. Davy Dishteinik, a senior faculty member at Tel Aviv University, suggests that an outright abolition of the 200 shekel notes might be more logical than selectively removing specific series. He argues that since some series have already re-entered circulation through trade in shekels, a complete withdrawal would be more efficient.
The discourse surrounding the proposal to abolish 200 shekel notes illustrates the complexities of managing currency in relation to both economic health and security considerations. As the situation evolves, further discussions may lead to new strategies for addressing these pressing issues