A copy of bitcoin ? standing on a PC motherboard ? is seen in this illustration picture, October 26, 2017. REUTERS/Dado Ruvic/Files

WASHINGTON: Digital currencies like bitcoin could pose a threat to financial stability as they gain wider use, a chief Federal Reserve banking oversight official said Thursday.

The remarks from Randal Quarles ? the newly-installed Fed vice chairman for Supervision ? came as the cryptocurrency took a vertiginous dive on Thursday after skyrocketing earlier in the week to more than 10 times its value at the start of the year.

Bitcoin is also increasingly being embraced by Wall Street, with plans reportedly afoot at markets including Nasdaq and Chicago's Mercantile Exchange and Board of Options Exchange to offer trading in the currency's futures.

Decentralized digital currencies like bitcoin operate as a payments system with no central bank and are exchanged between sellers and buyers using cryptography.

Around 1800 GMT (11 PM PST) on Thursday, Bitcoin had a total market value of about $163 billion.

It was trading at $9,670.85.

In remarks delivered Thursday in Washington, Quarles said that in times of crisis, demand for liquidity among bank depositors often shoots up, putting major financial institutions under strain.

But it is not clear how digital currencies would perform in similar situations.

"The 'currency' or asset at the centre of some of these systems is not backed by other secure assets, has no intrinsic value, is not the liability of a regulated banking institution, and in leading cases, is not the liability of any institution at all," he said in prepared remarks.

"While these digital currencies may not pose major concerns at their current levels of use, more serious financial stability issues may result if they achieve wide-scale usage," said Quarles.

Resulting risks to price could create "a large challenge to the system," he added, if digital currencies could not be predictably exchanged for the US dollar at a stable exchange rate in "times of adversity".

Nasdaq President and CEO Adene Friedman tamped down talk of futures trading, telling CNBC that the tech-heavy New York exchange was still considering its next move.

"We actually haven't announced anything," she said. "I would just say that we have been having active dialogue with a lot of clients and with partners about what might be possible over time."