Suddenly the technical term, Blockchain, is a live issue for central banks. Surprisingly it is not actually a punishment used in the United States penitentiary system, but it is in fact the technology Facebook say they will use to power their bid to launch a global digital currency to be called Libra.

Facebook’s audacious claim that soon their 2.4 billion users together with many of the 1.7 billion “unbanked “ citizens around the world will be able to take advantage of their Blockchain enabled Libra currency to trade and settle transactions has, understandably, got the financial cognoscenti all of a twitter, so to speak. And some even are outraged. Patrick Jenkins, the eminent Financial Editor of the Financial Times, went on the attack, remarking: “As with any pledge by a $550bn company with 2.4bn users and a patchy record of trustworthiness, there is good reason to doubt the company’s motives. Yes, established financial services companies are sometimes guilty of gross overcharging. But can Facebook be trusted to be a benign revolutionary?” And just in case his readers hadn’t got the message loud and clear he went onto produce a doomsday quote from a New York professor, Scott Galloway, who warned “ first you get control of the media…then control of the money… then control of the military”. Jenkins concludes: “It would be alarming to see the Facebook coin become a default currency of the world, given the unanswered questions around accountability and control. Mr Zuckerberg may not look like a monster in his T-shirts and trainers, but, in true Frankenstein form, he might well have created one”

The language may be alarmist but the message is not lost on central banks. If Facebook is allowed to succeed then control of their countries’ monetary systems could be lost to the new Gods on the block down in Silicon Valley.

Before I examine what should happen let me explode one myth. Crypto currencies such as Bitcoin are, literally, a world apart from Zuckerberg’s Libra. Yes, Bitcoin uses Blockchain as the enabling technology but it is an open- ended Blockchain, which means anyone can join in. Libra is what’s known as closed-ended Blockchain and as such it operates between defined identified user groups. In other words the Libra currency will be controlled by its operating partners. Bitcoin is controlled by no one, which of course is its appeal to some of the more free-spirited amongst us.

How then do the high priests of central finance stop Zuckerberg and other imitators running away with their monetary spoons? I believe the answer is obvious. Central Banks need to issue their own digital currencies. Accordingly, when faced with the choice of using a digital currency offered by an organisation with the questionable reputation of Facebook or one issued by the Old Lady of Threedneedle Street, guaranteed by the Government, which one would you chose? Indeed, this week Agustin Carstens, who heads the BIS, which is known as the central bankers’ bank, let it be known that he supported the efforts of the world’s traditional monetary guardians in creating digital versions of state currencies. Echoing that New York professor, Carstens said coins backed by tech groups could “rapidly establish a dominant position in global finance and pose a potential threat to competition, stability and social welfare.”

There are of course other benefits from central bank digital currencies that the powers that be don’t like to talk about. For example, if the Bank of England did away with issuing the folding stuff and just went digital then overnight the tax-avoiding black economy disappears and also, probably, most money laundering as well. Why? Because all digital transactions are traceable whereas if I give £200 in crisp £20 notes that is not. Here important questions of privacy arise but given that the rising millennial generation seems quite happy to allow others to see vast amounts of data on them already then maybe this aspect of privacy is already a lost cause.

What are the pitfalls for the BoE and its fellow travellers? One is that central banks don’t have the technological expertise to handle high volumes of recorded digital movements but that is acquirable over time. I’m sure the likes of ex- employees of Mastercard or Visa would be happy to assist.

The very much bigger question is – would central banks making government guaranteed digital currency available to individuals and businesses mean that a vast wave of deposits move from high street banks to, in our case the BoE, destabilise the current banking system thereby reducing their ability to lend and thus curtailing economic growth? My answer is threefold. Firstly, the UK government already guarantees all deposits to the tune of £85k per deposit, so why move? Secondly if we are still worried significant deposits will move then we should put in place a negative interest rate for holding deposits at the BoE. And thirdly we would do well to remember that currently 85% of deposits are recycled as loans to the financial sector of which the vast majority is in mortgages. I would suggest that even if one and two fail to deter some depositors moving to the BoE the resultant dampening down of the absurd levels of inflation in house prices would be no bad thing in the long run.

It may take a while yet for Mr Carney’s successor to go full steam ahead but if they want to keep the financial system in their hands they had better get started down the digital road soon.

Stephen Hazell-Smith, otherwise known as the City Grump, has recently had his “The City Grump Rides Out” book published by Matador Books