The Bank of England is considering whether to introduce a digital currency in the UK for use by businesses and customers.
Governor Mark Carney said: “We are in the middle of a revolution in payments,” adding that the Bank should look into how electronic money could work.
This would be an electronic form of central bank money that could be used by households and businesses to make payments, alongside cash and money held in bank accounts.
The new form of money would not replace paper banknotes and physical cash but would run alongside it.
If such a currency were to be introduced in the UK, it could be denominated in pounds sterling, just like banknotes, so £10 of the digital currency would always be worth the same as a £10 note.
The Bank is inviting feedback to its discussion paper by 12 June. It wants to hear from the public, technology providers, the payments industry, financial institutions, academics, other central banks and public authorities.
Welcoming the paper, David Clarke, head of policy at Positive Money, said: “With the decline of physical cash, we risk surrendering even more power over our money and payments system to unaccountable private interests.
“It is timely that the government and Bank of England are working together to explore the benefits of a central bank digital currency, which would allow us to keep a form of public money and enable democratic control to be exercised over the monetary system.”
The Bank has not yet made a decision on whether to introduce one, and it intends to engage widely with people and organisations on the benefits, risks and practicalities of doing so.
The use of debit cards to make purchases overtook cash in 2017 and has continued to rise ever since.
While these payments are still based on the same sterling currency which is grounded in notes and coins, the depleted relevance of physical money is making the cash economy an increasingly expensive proposition for banks and ATM operators.
In February the new Chancellor Rishi Sunak was urged to include measures in the budget to protect the future of cash in the UK as campaigners believe the current physical currency system could collapse within a decade.
Earlier this week Sunak confirmed that it would bring forward legislation to ensure that everyone who needs to use cash will still have access to it.