A digital currency issued by the Hong Kong Monetary Authority would be safer than a cryptocurrency but could still be highly attractive to hackers, a computer science professor said on Friday.

The city's de facto central bank has launched a pilot scheme for the "e-HKD", but says it will only be rolled out if it's found to be more convenient and efficient than traditional payment methods.

John Yuen, an assistant professor at the computer science department at the University of Hong Kong, said the e-HKD would be safer than cryptocurrencies such as Bitcoin.

“The e-HKD is issued by the central bank, so it has less risk of bank runs or losing money by the bankruptcy of the bank or the digital wallet provider,” Yuen said.

He added that the e-HKD could be issued directly from the government instead of via third parties.

”In the last few years, people had to register their accounts in different digital wallet providers for the consumption voucher. We can avoid that if everyone had an e-HKD account,” he said.

Yuen said the introduction of the e-HKD may unlock more digital wallets and payment options, adding that society may benefit from more competition in the market.

“One interesting example is the use of smart contract technology in blockchain systems. A smart contract means there is a piece of source code that can execute things automatically. For example, transferring money from one to another," he said.

"You can buy travel insurance in a smart contract. In case your flight is cancelled, you can automatically get the e-HKD from the travel insurance contract. So you don't need to wait for a long time for the insurance company to reimburse you."

But Yuen also warned about potential risks that may come with a digital currency, including from hackers.

"There were quite a lot of hacking activities [connected to] smart contract which caused billions of dollars to be stolen in the public blockchain,” he said.

Yuen also said the digital currency may not offer as much privacy as physical cash, as all transactions will be recorded and cannot be amended.

"Physical cash has a very high level of privacy, right? If you spend it in a shop, then the shop owners give it to someone else. No one is able to trace your transactions. But electronic money like e-HKD can do so," he said.

He said authorities will have to strike a balance between protecting users' privacy and tracking down illegal money that flows into the financial system.