Bitcoin and its innovative underlying blockchain technology raised the possibility of decentralised currency and anonymous digital transactions but it remains on the periphery of the global financial industry – although JPMorgan is reported (by the Financial Times) to have begun a trial project to test the use of blockchain technology in its loan trading operations. But despite interest from numerous global banks, bitcoin remains in the shadows when it comes to everyday business, government and financial markets transactions.

Digital currencies on the other hand – a near cousin of the cryptocurrency – are attracting keen interest from momentous quarters. Unlike a cryptocurrency such as bitcoin, digital currencies can be issued and developed by governments and they can be issued by central banks in line with a country's monetary policy. They very much have the potential to be fiat currency.

Digital yuan

China's central bank announced in January that it has been developing its own digital currency and intends to roll it out in the near future. Why would it want to do this? The People’s Bank of China (PBOC) stated on its website that it has consulted with experts from Citigroup and Deloitte but no further details have yet been announced. China's interest in a digital currency could be an attempt to stem the flow of capital leaving Chinese accounts. According to Bloomberg, around $843 billion of capital left China between January and November 2015. A 'digital yuan' would enable the Chinese government to track transactions and improve its ability to control China’s currency.

And China isn't the only government looking at digital money. The Philippines is already trying to use blockchain technology to issue its own digital currency.

eCurrency: best of both worlds

What's clear is that it is of utmost importance to governments to maintain control and visibility of financial transactions. One Dublin-based start-up is developing technology that would help governments do just that. eCurrency Mint's technology would enable central banks to issue digital currency that has some of the attributes of both bitcoin and physical cash. The supply of the digital currency – called eCurrency – would be determined by each country's monetary policy. But eCurrency does not use blockchain technology. Each eCurrency coin – it is a physical, digital but not virtual currency – has a unique identifier that tells the central bank how much that coin is worth. The physical objects are called cryptocomplexes and they are physical digital objects that the central bank produces and puts into circulation, just like normal currency.

Demand for digital is 'unstoppable'

Jonathan Dharmapalan, founder and CEO of eCurrency Mint, explained why there is momentum now for a digital currency: “The demand for money to be digitised is unstoppable – the next generation is going to want to transact digitally.”

One of the investors in eCurrency Mint is eBay founder and philanthropist Pierre Omidyar, or rather his company Omidyar Network, which focuses on economic and financial social development.

Social benefits of digital currency

Omidyar Network stated that it sees eCurrency as a way to accelerate financial inclusion by turning some of the mobile money systems in emerging countries, such as Kenya's M-Pesa, into sovereign-backed national currencies — therefore increasing trust and addressing key issues hindering broader adoption. It would also help to increase access to and use of financial services for those who are today excluded. According to Omidyar Network, 40% of working age adults globally are outside the formal financial sector.

Overall, non-blockchain digital currencies seem to be attracting some of the serious support that cryptocurrencies such as bitcoin are lacking. This could be crucial in determining whether digital currencies emerge into the mainstream in the near future. With the backing of the Chinese government, other countries are sure to follow. The argument that digital currencies will enable greater social financial inclusion may have concrete social benefits but the financial market share this also represents will not be lost on banks looking to enhance their digital services.