Central banks hope to beat Bitcoin at own game with rival supercurrency

The purpose would be turned upside down. RSCoin would be a tool of state control, allowing the central bank to keep a tight grip on the money supply and respond to crises. It would erode the exorbitant privilege of commercial banks of creating money out of thin air under a fractional reserve financial system.  

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"Deep in the markets there are dark pools buying and selling shares, and entities that facilitate that foreign exchange. There are Visa, Master, and PayPal. These are the sorts of guys that we are going to disrupt," he said.

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Central banks at first saw Bitcoin as a rogue currency and a threat to monetary order, but they are starting to glimpse ways of turning the new technology to their advantage.

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Mr Broadbent said the system could in principle be used to cover government services, tax collection, and benefit payments. It is more likely to start with the settlement of bonds and equities, and for exchanges and clearing houses.

The settlement systems used by central banks -- CHAPS, TARGET2, and Fedwire -- are expensive and rely on stagnant technology. The UK-based CHAPS system handled £68 trillion of transactions last year.

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RSCoin may be irresistible for central banks. Dr Danezis said it is allows them to turn the money tap on and off with calibrated precision, and lets them track the sort of counterparty liabilities that nearly blew up the financial system during the Lehman crisis. "There would be instant visibility. They could react very quickly in an emergency, " he said.