The Bank of England could green light its own Bitcoin-style digital currency as early as 2018, The Telegraph can disclose.

A research unit set up by the Bank is investigating the possible introduction of a crypto-currency linked to sterling.

If approved, a virtual currency issued by the bank would pave the way for a revolutionary shake up of high street banking.

A Bank of England-issued digital currency would potentially allow British citizens to keep their money - in digital form - with the central bank itself, dispensing with the need for a retail bank. Big-ticket transactions, such as buying a house, could happen in nanoseconds.

The research unit was set up in February 2015 and, according to a Bank of England spokesman, could report back within the next 12 months.

The Bank has been trialling technology for digital transactions, using the same technology that underpins Bitcoins and other crypto-currencies.

The value of a Bitcoin has risen sharply in the past year. It was worth about £720 in January, peaking at almost £15,000 in mid-December, before falling back dramatically to below £10,000 in the immediate run-up to Christmas.

The volatility - and seeming endless popularity - of Bitcoin will intensify pressure on the Bank of England to make a decision on an alternative digital currency of its own. The currency would be pegged to sterling and underpinned by the Bank, making it far less volatile than Bitcoin.