Scottish banknotes could be lost under SNP plans for a currency union in the event of independence, the Treasury has suggested.
A UK Government report on the implications for the currency of Scottish independence will be published tomorrow and raises questions about the existence of Scottish banknotes in the event of a Yes vote in next year's referendum.
The Treasury said the Bank of England, as the central bank of the UK, is responsible for regulating the issuing of notes by all commercial banks and its role would have to be reviewed under independence.
It could mean Scottish notes would be worth less than Bank of England notes outside of Scotland and would be rejected by retailers, a Treasury spokeswoman said.
The Scottish Government has set out plans to retain the pound as Scotland's currency if the country votes for independence in next year's referendum, in what the First Minister has described as a "sterling zone" with the rest of the UK.
Economics experts in the Fiscal Commission Working Group, set up by First Minister Alex Salmond, have already concluded that keeping sterling as the currency in an independent Scotland was sensible and an attractive choice for the rest of the UK.
The Treasury report will say both Scottish and UK governments would need to agree if the commercial banks in an independent Scottish state could continue to issue sterling banknotes in a formal currency union.
However, a Scottish Government spokesman said: "The existing situation relating to Scottish banknotes will remain in place within a post-independence currency union."
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