The Bank of England said on Monday that payments with "stablecoins" – a form of cryptocurrency usually pegged to a traditional currency – should be regulated in the same way as payments handled by banks if they start to become widely used.

The central bank also said it had made no decision yet about whether to issue its own central bank digital currency, or CBDC, a prospect dubbed 'Britcoin' by finance minister Rishi Sunak when he asked the BoE to look into this in April.

"The prospect of stablecoins as a means of payment and the emerging propositions of CBDC have generated a host of issues," BoE Governor Andrew Bailey said. "It is essential that we ask the difficult and pertinent questions when it comes to the future of these new forms of digital money."

Stablecoins are cryptocurrencies designed to have a stable value relative to traditional currencies or to a commodity such as gold, to avoid the volatility that makes bitcoin and other digital tokens impractical for most commerce.

None have gained much traction in day-to-day commerce, but a proposal by Facebook in 2019 to create a digital currency for use on its platforms alarmed financial regulators.

If digital currencies become big enough to have an impact on financial stability, they would require greater regulation than at present, the BoE said.

"Stablecoins used as money should meet equivalent standards as those provided by commercial bank money, otherwise known as bank deposits," the BoE said. Stablecoin issuers would need to meet capital and liquidity rules, and offer deposit insurance.

The BoE is among major central banks across the world revving up work on issuing digital cash, a move aimed at fending off potential threats to traditional money and making payments systems smoother.

The People's Bank of China is leading the charge, and the U.S. Federal Reserve last month said it would accelerate its work on a digital dollar.