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Home > Research > Digital Currencies

Digital Currencies

A digital currency is a means of payment that only exists electronically. Like traditional money (such as banknotes), they can be used to buy physical goods and services.


Private digital currencies

Private digital currencies combine new payments systems with new currencies that are not issued by a central bank. The most well-known privately issued digital currency is Bitcoin, but other examples include LiteCoin, Ethereum and Ripple. We have assessed private digital currencies and concluded that while they are interesting, they do not currently pose a material risk to monetary or financial stability in the United Kingdom. We continue to monitor developments in this area.

Distributed ledger technology and blockchain

Bitcoin and other private digital currencies are underpinned by distributed ledger technology (also known as blockchain), which is an electronic ledger that records and verifies transactions made using the currency. Distributed ledger technology may have many other uses across the financial system, and may be a useful platform to power a central bank digital currency (although existing technology may also be sufficient).

Our fintech accelerator has carried out a distributed ledger technology proof of concept, which will help inform our research into central bank-issued digital currencies.

Central bank-issued digital currencies.

At the moment, the Bank of England provides electronic accounts to banks and key financial institutions, but the public can only hold central bank money in physical form – as banknotes. If a central bank were to issue a digital currency everyone, including businesses, households and financial institutions other than banks, could store value and make payments in electronic central bank money in addition to being able to pay with cash.

While this may seem like a small change, it could have wide-ranging implications for monetary policy and financial stability.
We are undertaking a multi-year research programme into the implications of a central bank, like the Bank of England, issuing a digital currency. We first raised the possibility of a central bank-issued digital currency in our research agenda in February 2015. We have since released a more detailed selection of research questions on the topic. We welcome continued engagement from the wider central banking and academic community to shape our research in this emerging field.

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Publications on digital currencies and distributed ledger technology

To date, we have published the following speeches and documents on the topic of digital currencies and distributed ledger technology:

Date ​Title Description​
​June 2017 ​Article by Chief Cashier Victoria Cleland ​Article originally published in Global Public Investor 2017
​September 2016 Speech given by Chief Cashier Victoria Cleland ​Speech on fintech given at the 2016 P2P Financial Systems International Workshop, hosted by University College London.
​July 2016 Bank of England digital currencies research questions ​Detailed selection of research questions focused on the economic, technological and legal impact of a central bank-issued digital currency.
​July 2016 The macroeconomics of central bank digital currency ​Staff working paper outlining the likely macroeconomic implications of establishing a central bank-issued digital currency.
​June 2016 Speech by Governor of the Bank of England to have been given at Mansion House ​Speech on enabling the fintech revolution, in which the Governor raises the possibility that distributed ledger technology may enable a central bank digital currency.
​March 2016 Speech given by Deputy Governor Ben Broadbent ​Speech focusing on central bank-issued digital currency, which sets out major economics questions including who could have access to a central bank-issued digital currency and whether a central bank-issued digital currency could compete with cash or bank deposits.
​February 2015 One Bank Research Agenda ​Page 31 summarises our research on central bank-issued digital currencies and sets out general questions around whether there is any rationale for a central bank to issue a digital currency and what would be the economic, technological and regulatory challenges of doing so.
​September 2014 Quarterly Bulletin: Innovations in payment technologies and the emergence of digital currencies ​The distributed ledger underlying private digital currencies payment systems is a significant innovation and could result in transformation of the financial system.

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​September 2014 Quarterly Bulletin: The economics of digital currencies ​Private digital currencies do not currently pose a material risk to monetary or financial stability in the United Kingdom. The Bank continues to monitor developments in this area.