BITCOIN, the poster child for digital currencies, is proving something of a headache for central banks. Should they ban it, regulate it, embrace it, undermine it or just ignore it? Their best bet would be to let Darwinism take its course, and resist the regulatory impulse to interfere with either bitcoin's survival or demise. And, if it lives, they should step aside and celebrate innovation rather than try to block its progress.

Bitcoin has always posed a challenge to central bankers' exclusive power to mint money, but it's never been clear how the official guardians of monetary stability would respond to it. Reports published in recent weeks by the European Central Bank (ECB) and the Bank of England suggest they're scrambling to keep all of their options open. Schizophrenia is setting in.

The ECB's kaleidoscopic list of central bank views on what bitcoin is or isn't illustrates the quandary. Sweden and Finland deny it is a currency at all; the latter also disqualifies it as an instrument of payment, while the former taxes it as an asset. Germany regards it as a unit of account, akin to the International Monetary Fund's Special Drawing Rights, so not legal tender but still a form of financial instrument. The Federal Reserve regards the technology as not "sufficiently mature" but worthy of "further exploration and monitoring"; it also says it doesn't have the right to regulate digital money.