GAZA, (PIC)
Amid the ongoing discussions about the arrangements of the day after the war on the Gaza Strip, the debate is not limited to the form of governance or reconstruction, but extends to reshaping the financial structure itself.
Among the proposals that have recently emerged is pushing toward a digital economy model, or launching a stable digital currency linked to the US dollar inside the Strip.
While the proposal is presented as an organizational step to combat monetary chaos, enhance transparency, and address the liquidity crisis, experts see the issue as deeper than its technical dimension, touching the core of sovereignty over the financial space in Gaza.
From a liquidity crisis to proposals to abolish cash
During the war, the Strip suffered from a severe liquidity crisis due to strict restrictions on the entry of cash, which disrupted markets, weakened purchasing power, and created price distortions between cash and transfers.
In this context, the shortage of cash coincided with Israeli proposals related to reducing or abolishing cash transactions inside Gaza, considering cash a path that is difficult to control from a security perspective.
At that time, Israeli Foreign Minister Israel Katz had raised in different contexts ideas to re-regulate the financial system in Gaza within post war visions, including tightening control over cash flows and preventing funds from reaching entities Israel considers hostile.
Observers believe these proposals formed an intellectual and political groundwork for the idea of moving financial activity from paper circulation to a digital space that can be centrally controlled, so that every financial movement becomes traceable and manageable.
A dollar linked stable currency
In a notable development, the Financial Times reported that the Peace Council affiliated with US President Donald Trump is studying the launch of a stable digital currency linked to the US dollar in Gaza.
The proposal is led by Israeli businessman and former officer in Unit 8200 Liran Tankman, in cooperation with the Gaza Administration Committee and the Office of the High Representative headed by Nikolay Mladenov, with these parties determining the regulatory framework and access mechanisms to what is called the stable currency.
According to an informed source cited by the newspaper, the project will not be a Gaza currency or a new Palestinian currency, but rather a means to allow Gaza residents to conduct transactions digitally, meaning that the discussion is about a digital payment instrument linked to the US dollar and not an expression of national monetary sovereignty.
The project is still in its initial stages, with expectations that it will be directly pegged to the dollar, while details of the reserves or the entity that will actually manage them have not yet become clear.
What is a stable currency?
A stable currency is a type of digital currency designed to maintain a fixed value, often by being pegged to a stable asset such as the US dollar, the euro, or gold.
Its value is usually stabilized through an actual cash reserve, so that each unit is backed by a real dollar kept in a bank, or through digital collateral, other cryptocurrencies, or through algorithms that regulate supply and demand to maintain the price, which is the most risk prone type.
Common global examples include USDT and USDC, which are usually priced at the equivalent of 1 dollar.
These currencies are used to reduce the sharp volatility found in currencies such as Bitcoin, to transfer funds quickly and at lower cost across borders, and as a relatively stable digital payment method.
However, this model is not without risks, as the currency may suddenly lose its peg to the dollar if the reserves are not real or sufficient, in what is known as a de pegging event.
The lack of transparency in some cases, and the absence of clear and continuous auditing of reserves, also raise doubts about the issuing entity’s ability to cover every issued unit.
There is also the risk of a run on withdrawals, if a large number of users attempt to redeem their funds at the same time, sufficient liquidity may not be available.
In addition, full reliance on digital infrastructure makes any internet outage or technical malfunction a direct cause of freezing transactions.
Not a neutral technical step
In this context, economic affairs expert Ahmed Abu Qamar emphasizes that launching a digital currency in Gaza is not a neutral technical step, but rather a political economic project that redefines the form of control over the financial space.
He explains that some of the proposed visions are based on reshaping the Strip as a space stripped of monetary sovereignty, where the financial domain is managed from outside direct Palestinian will.
Abu Qamar adds that the digital currency, if it is not subject to full Palestinian sovereignty over data, servers, payment systems, and reserves, can turn from a facilitation tool into a tool of collective control. When transactions are moved to centralized digital platforms, every financial operation becomes traceable, trackable, and possibly programmable, opening the door to redefining how access to money itself works.
He continues that the danger lies not only in the ability to prevent the entry of paper cash, but in the possibility of freezing or restricting digital wallets with a single administrative decision.
He says that digital control means that access to money may become dependent on an operational signal that can be suspended, whether for security or administrative motives.
According to his assessment, this scenario opens the door to linking basic services, aid, or salaries to levels of political or security compliance, turning the economy into a network of digital conditions and reshaping the relationship between the individual and the financial system on non-traditional foundations.
Abu Qamar also notes that comparison with the experiences of countries developing sovereign digital currencies is not entirely appropriate, because those countries possess full sovereignty over their banking and technological infrastructure.
In the case of Gaza, where there is no national currency to begin with, and financial movement is subject to external restrictions, replicating a dollar linked stable currency model without the availability of sovereignty conditions turns the tool into a means of external management of the economy, not an instrument of internal empowerment.
Abu Qamar does not deny that the digital economy carries real advantages, from improving transparency to accelerating transactions and reducing transfer costs, but he stresses that the success of any experiment requires legal guarantees that protect privacy and freedom of disposal of money, in addition to full Palestinian control over the digital infrastructure and its operating keys.