Central banks typically take an interest in retail payments as part of their role in maintaining the stability and efficiency of the financial system and preserving confidence in their currencies. Innovations in retail payments can have important implications for safety and efficiency; accordingly, many central banks monitor these developments. The emergence of what are frequently referred to as “digital currencies” was noted in recent reports by the Committee on Payments and Market Infrastructures (CPMI) on innovations and non-banks in retail payments. A subgroup was formed within the CPMI Working Group on Retail Payments to undertake an analysis of such “currencies” and to prepare a report for the Committee. The subgroup has identified three key aspects relating to the development of digital currencies . The first is the assets (such as bitcoins) featured in many digital currency schemes. These assets typically have some monetary characteristics (such as being used as a means of payment), but are not typically issued in or connected to a sovereign currency, are not a liability of any entity and are not backed by any authority. Furthermore, they have zero intrinsic value and, as a result, they derive value only from the belief that they might be exchanged for other goods or services, or a certain amount of sovereign currency, at a later point in time. The second key aspect is the way in which these digital currencies are transferred, typically via a built-in distributed ledger. This aspect can be viewed as the genuinely innovative element within digital currency schemes. The third aspect is the variety of third-party institutions, almost exclusively non-banks, which have been active in developing and operating digital currency and distributed ledger mechanisms. These three aspects characterise the types of digital currencies discussed in this report from BIS.