Central banks around the world are working on digitising cash. Will it pay off?

The timing could not have been better for its fans. When the paper that introduced Bitcoin’s protocol appeared on Halloween 2008 under the pen name Satoshi Nakamoto, the financial system was running scared. Bitcoin was not about to fix the excesses of arcane financial magic gone wrong in the shape of collateralised debt contracts. But it promised believers with piles of cash a way to sidestep the traditional financial institutions.

Nakamoto presented Bitcoin as ‘electronic cash’. But it shares few characteristics with cash other than the ability to spend it without relying on a bank or similar intermediary to process the transaction. Bitcoin enthusiasts are keen on one of these characteristics: it promises the ability to break away from something that gave cash its credibility over the past 10 centuries. It is not fiat money like the folding form, created by a central bank and passed on to private banks for...