A big global bank is working on its own version of Bitcoin.

The Bank of England has partnered with researchers at University College London to create a digital currency called ‘RSCoin’, which will use cryptography to combat counterfeiting.

But unlike the advanced block chain encryption underpinning Bitcoin, RSCoin will be controlled by a central body.

Blockchains use distributed ledgers in a network of computers record transactions, where each computer must approve a transaction before it is recorded in a new “block”.

UCL researchers Sarah Meiklejohn and George Danezis have previously reported on a potential monetary policy for RSCoin that would see it controlled by the central bank.

In a 2015 paper outlining the idea, Meiklejohn and Danezis wrote that the technology would have to be reliant on a distributed set of authorities - like banks - to prevent double-spending.

“Central banks maintain complete control over the monetary supply, but rely on a distributed set of authorities, or mintettes, to prevent double-spending. While monetary policy is centralised, RSCoin still provides strong transparency and auditability guarantees,” the paper states.

“The ultimate goal for RSCoin is to achieve not only a scalable cryptocurrency that can be deployed and whose supply can be controlled by one central bank, but a framework that allows any central bank to deploy their own cryptocurrency.”

Bitcoin and other existing crypto-currencies are very difficult to scale up, and this has been a major issue prevent authorities like banks from getting on board.

The block chain system means that Bitcoin can handle a maximum of just seven transactions per second, and “faces significant challenges in raising this rate much higher” as every block requires more computational energy than the last.

By comparison, Paypal can handle about 100 transactions per second, while Visa deals with anywhere from 2000 to 7000, the researchers said.

RSCoin has been tested within Amazon Web Services, the paper states, and the team behind it is looking at real-world implementation.

The code for RSCoin has been published on Github.

Meiklejohn said a RSCoin ledger could be published publicly in order to calm transparency concerns, while still letting a bank to make transactions entirely, or partially, anonymously.

Banks and finance bodies around the world are looking at their own digital currency platforms, including the Australian Securities Exchange (ASX).

The ASX is looking to replace its post-trade platforms for clearing and settlement services to the local equity market with distributed ledger technology.

But at the same time, the stock exchange has blocked a planned public float by Botcoin in Australia. 

The Commonwealth Bank, NAB, Westpac, ANZ and Macquarie Bank are all part of an experimental blockchain-based system being tested for trading fixed income as part of an RS CEV project.