Currently, the BofE only provides accounts to commercial banks, acting as a trusted third party where they hold reserve deposits. But a central bank digital currency would widen access to the organisation's balance sheet, says Deputy Governor Ben Broadbent.

"That might mean adding only a narrow set of counterparties - non-bank financial companies, say. It might mean something more dramatic: in the limiting case, everyone - including individuals - would be able to hold such balances," Broadbent says in a speech at the London School of Economics.

What exactly a BofE service would look like is up for debate, says Broadbent: it could be simply 'e-cash' that can only be used for retail transfers, or it could be a proper account that pays interest.

If the latter was introduced, in some ways this would be good for the commercial sector, making banks safer by reducing the risk of a run if a shock causes people to try to close accounts. "The central bank can’t run out of cash and therefore can’t suffer a “run”," he notes.

But, taking deposits away from banks makes it harder for them to make loans and could make them more reliant on wholesale markets, "a source of funding that didn’t prove particularly stable during the crisis, and could reduce their lending to the real economy as a result".

Broadbent's speech comes as the BofE begins developing a blueprint to modernise the UK's 20-year old real-time gross settlement system, which could see distributed ledger technology enlisted.

Meanwhile, the deputy governor's colleague, Andy Haldane, has floated the prospect of abolishing paper cash and replacing it with a state-backed digital currency as a way of facilitating negative interest rates.