Eventually, though, the enigma may evaporate all by itself. We’re entering the world of cryptocurrencies, after all – and paying for stuff might never be the same again.

In an earlier incarnation, Bank of England governor Andrew Bailey was the institution’s chief cashier. So he used to ponder the banknotes riddle as an almost full-time occupation.

Now, as he told the Brookings Institution in a speech last month, he’s much more preoccupied with the challenge yet to come: how to regulate a payments system – ensuring it works and is resilient – when the very nature of payment is changing.

He’s not talking about e-money, although he does worry that its users aren’t aware that their deposits aren’t fully protected. He’s not talking about bitcoin, which in his striking view is not money at all but “a highly risky investment opportunity”.

He’s talking about stablecoin, a blockchain-based payment system that’s tied to the value of an asset or currency. Stablecoins have the potential to make payments smoother, cheaper (especially if global), and more convenient (especially if integrated into social media or online retail).

What worries him is that some stablecoins are still basically an investment –they carry a degree of risk, however low – rather than having the same status as cash. To be like money, their value would be completely stable and redeemable at par in a fiat currency, and a stablecoin deposit would be fully legally protected.

To achieve this, he reckons stablecoins will have to walk before they can run. They’ll need to be national at first, rather than global, and might even need to be tied to an entity incorporated in that country.


As for global stablecoins, he says, central banks will have to work together to lay out a standard, possibly backed by a political commitment from the G20.

If that all sounds like a bit of a quagmire, there’s another train of thought which suggests central banks should skip from just regulating stablecoins to creating their own.

Up to 50 players, apparently including the Reserve Bank of Australia, have at least looked into it. The European Central Bank last week said it was actively developing a digital euro, although it hadn’t yet decided to actually introduce it.

A Central Bank Digital Currency (CBDC) would, on the face of it, close the mysterious case of the cash economy. It would create a safe baseline as cash disappears, so that consumers aren’t reliant solely on what could become a Wild West of commercial digital currencies and payments systems.

But Bailey has unanswered questions. Would a CBDC unsettlingly turbo-charge monetary policy? Would it tear down the banks’ fundamental business model and even precipitate a financial crisis?

And if private providers like Facebook are also offering digital currencies, whose job is it to protect the infrastructure and consumers, to preserve privacy – while still allowing legitimate data mining – and to ensure a level playing field?

Many CBDC proponents want to pre-empt Big Tech or Beijing from monopolising this evolving world. Bailey, though, frets that the heavy tread of central banks might “strangle innovation”.

So the BoE is basically still mulling it over. Bailey, being a banker, is taking a slightly more cautious approach to money than The KLF.