Fed's Powell warns of digital currency's risks

A Bitcoin logo is displayed at the Bitcoin Center New York City in New York's financial district, U.S. on July 28, 2015. REUTERS/Brendan McDermid/File Photo

NEW HAVEN, Conn. (Reuters) - A top U.S. Federal Reserve official on Friday raised caution about central banks issuing digital currencies as they are vulnerable to cyber attacks and criminal activities along with privacy issues that still need to be addressed.

"A digital currency issued by a central bank would be a global target for cyber attacks, cyber counterfeiting, and cyber theft," Fed Governor Jerome Powell said in prepared remarks at a conference held at the Yale Law School on payment technology.

A digital currency such as bitcoin would be a "prime target" for global criminal activities including money laundering, Powell said.

He added central banks would need to keep track of digital currency issuance but could raise serious privacy concerns by users and might reduce its appeal.

"Again, there may be important trade-offs between payment and privacy," he said.

(Reporting by Richard Leong; Editing by Chizu Nomiyama)

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