New warnings over central banks involvement with digital and cryptocurrency were recently issued by a governor of the U.S. Federal Reserve Jerome H. Powell. In a prepared statement, Powell told conference attendees at Yale Law School that digital currencies issued by a central bank would become global targets for cyberattacks, cyber counterfeiting and cybertheft.
“Central banks could face difficult trade-offs between strengthening security and enabling illegal activity,” Powell said. “Advanced cryptography could reduce vulnerability to cyberattacks but make it easier to hide illegal activity. To the extent we relax strong cryptography to make it easier for authorities to monitor illegal activity, we could simultaneously weaken security.”
While Powell’s speech does not dismiss digital currency and distribute ledger technologies outright, the Federal Reserve governor warns that significant security and privacy issues still exist in both spaces and will need to be addressed moving forward.
“We live in a time of extraordinary technological change,” Powell said. “We should be open to the new ideas and innovations that will drive economic growth and improvements in our financial system. At the same time, the public rightfully expects that authorities will do whatever it takes to keep their money safe.”
Powell’s warning comes at a time when the value of digital currency bitcoin is at an all-time high, due to investor optimism on the potential SEC approval of a bitcoin-based exchange-traded fund. On Friday, the value of one bitcoin nearly broke $1,300, more than the price of gold per ounce.
Powell’s speech also comes at a time when numerous global financial institutions and technology companies are investigating the value of distributed ledger technologies, especially blockchain.
Late last month, a number of technological and financial organizations announced the formation of a nonprofit organization called the Enterprise Ethereum Alliance. Their goal is to create a new blockchain computing system based on the network of Ethereum, a decentralized platform for applications that backs the popular digital currency Ether.