“If you can’t beat them, join them,” could well be the mantra for the world’s central bankers. Having watched as bitcoin went from obscure experiment in digital money to a currency with a market value of almost $10bn, they themselves are now experimenting with digital currencies rather than waiting idly to be swept away by the tide of technology.

Countries around the world — the UK, Russia, Canada, Australia, China and many more — are examining how they might mint their own digital currencies and put money on the blockchain. Efforts have intensified this year, although research is still at an early stage and many puzzles have yet to be worked out. But most agree on one thing: that the world is moving towards use of digital currencies.

Within the Bank of England, a team is already considering what a central bank-issued digital currency could mean. “The technology is moving quickly,” says Victoria Cleland, chief cashier, in her glassed-walled office inside the fortress-like Bank. “A lot of people think central banks are very risk averse, but we are thinking, ‘Are there opportunities to grasp innovation ourselves?’”

In assessing the risks and benefits, the central bank is canvassing the views of counterparts in other countries, academics and commercial banks to work out answers to the big questions. It needs to know how turning its cash digital would affect the economy and financial stability, as well as determine whether the technology would be robust enough to stand up to hackers and serve the UK’s 65m people. “This isn’t something we can squirrel away in the central bank because, if we were to do it, it would be completely transformative,” says Ms Cleland.

Central bankers began their homework by poring over bitcoin, the digital money launched online by an unknown computer scientist in 2009.

Its breakthrough was that it was secured not by any central overarching body, but by cryptography. Its operating system is a blockchain, and each transaction becomes a block that is linked — or “hashed” — by computers to the chain to form a permanent record of every transaction (a blockchain network) which is visible to all.

Bankers are drawn by the idea of fast, efficient, digital money that does not carry the cost of handling cash, and that can be tracked as it moves through the financial system. These advantages promise benefits in cutting risk, fraud and executing monetary policy. Central banks’ interest in deploying a blockchain to do this comes in step with moves by commercial banks and other financial institutions to use the technology to ease cross-border settlement transactions and overhaul antiquated back-office infrastructure.

They are less drawn, however, by the idea of digital money they cannot control and that can be used anonymously, the consequence of another aspect of bitcoin’s innovation: its decentralised, peer-to-peer network. Any central bank coin to emerge would have to find a different model.

There is an unresolved tension between blockchain libertarians who support open-source, decentralised networks, and those who seek closed, controllable databases.

“What is really exciting is cryptocurrency’s ability to have true peer-to-peer cash and transfer of assets. This is the real advance,” says Jerry Brito, executive director of Coin Center, a non-profit research organisation focused on the public policy issues around cryptocurrency technologies.

At the Bank of England, radical options are being discussed. One scenario even involves the blockchain being used to bypass high-street banks, with individuals holding accounts directly with the central bank, cutting out the commercial banks’ role as middleman in the circulation of money. One person familiar with the process says that high street banks have been privately pushing against this model.

But the days when bankers worried that bitcoin might be a threat to national currency are fading.

“We don’t see private currencies having an edge over fiat currencies [those declared by central banks to be legal tender],” says Dong He, who has led research by the International Monetary Fund into digital currencies.

“There have been episodes of private currencies competing with government-issued coins and notes but ultimately they were replaced by fiat currency.”

A bigger issue is regulation of digital currencies. This is a looming challenge that will require cross-border co-operation. Monetary authorities must come together, Mr He says, to start thinking about the necessary regulation of digital money that will be flowing around the world. He says the IMF should provide a platform for discussions to happen.

When a move to official digital currencies might occur is hard to estimate, he says, but a switch could happen within the next five to 10 years. For him, it is a question of moving with the times. When large parts of the financial system are using blockchain for financial transaction, so will central banks.

Of course, money is already electronically held and processed, but blockchain technology could offer a far more sophisticated operating system, with the prospect of “smart” money.

Charles Hoskinson, head of IOHK, a company that makes cryptocurrencies, says being able to “programme” cash held in accounts will benefit ordinary people, corporations and governments. “You can put all kinds of extremely advanced terms and conditions on a digital account for money: where, when and who can spend it, and how much I can spend. That can happen with a bank account on a digital ledger.”

Digital currencies will eventually benefit the developing world too, says Tilman Ehrbeck, a partner at the philanthropic investment firm Omidyar Network, set up by eBay founder Pierre Omidyar.

Kenneth Rogoff warns that central bank-operated digital currencies could be ‘decades away’

Mr Ehrbeck argues that because they are low-cost and easy to use on electronic devices, digital currencies will enable greater access to financial services for the billions of the world’s unbanked. But for now, the research is most concentrated within the financial sector.

“It’s inevitable there will be a government digital currency, eventually,” says Kenneth Rogoff, a professor at Harvard who studies the concept of a “less-cash” society. He believes that cash will never disappear, and that there will always be a role for small notes.

“Eventually, there will be government digital currencies that ordinary people have access to at very low cost.”

But he warns: “A government digital currency could be many decades away, and there are all sorts of security and regulatory issues that have to be navigated first. That said, many central banks are already thinking about it.”