Banknotes and coins are both a means of payment and a symbol of sovereignty. As the Fathers of the Yishuv (Jewish settlements in Eretz Israel) engaged in establishing, and naming, the new state, they confronted the matter of currency. They had to decide what would be printed on their banknotes and where they would print them.
The banknotes could not be printed in the land itself. The British Mandate had not yet expired, and they lacked the technical expertise. At the same time, it was clear that no reputable foreign firm would print money for a nonexistent state. After considerable effort, Mr. S. Hoofien, then Chairman of the Board of the Anglo-Palestine Bank, persuaded the American Banknote Company of New York to print the notes.
To avoid the need for State Department approval for printing banknotes of a foreign country, the notes as ordered gave no indication of their being legal tender. The legend “Legal tender for payment of any amount” was subsequently added. In addition, the company stipulated that its name should not appear on the notes.
The design of the banknotes was based on different combinations of guilloches (a decorative engraving technique in which a very precise intricate repetitive pattern or design is mechanically engraved into an underlying material with fine detail) in the company’s stock, some of which were used for printing banknotes for China. When the banknotes were ordered, no one yet knew what the name of the new state would be, let alone its currency. It was therefore decided to print “Palestine Pound” on the notes, the currency of the mandate.
However, it states in Hebrew only “One Eretz Yisraeli Lira” (Lira E.Y. achat) and similarly for all other denominations.
The banknotes reached the country secretly in July 1948. On August 17, the government passed a law declaring the notes legal tender, and they were put into circulation on the following day.