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.

The Bank of England is carrying out ongoing research into various types of digital currency, and the technology that underpins them.

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 UK. We continue to monitor developments in this area.

PDFThe economics of digital currencies: QB article

PDFInnovations in payment systems and the emergence of digital currencies: QB article

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, we provide 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 do not currently plan to issue a central bank-issued digital currency. However, we are undertaking research to better understand 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.

For further information, email

PDFBank of England digital currencies research questions

PDFOne Bank research agenda

This page was last updated 02 January 2018
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