The Quantum Threat to Encryption

A New Y2K Problem

The use of quantum computers for everyday trading remains a long-term prospect, but quantum cryptography and post-quantum encryption are already live concerns. Financial institutions must prepare for the risk that current encryption methods could be rendered obsolete by advances in quantum computing, necessitating a shift toward quantum-safe cryptographic methods.

Published on: 24 Mar, 2025somdn_product_page

Description

This report describes the nature of the threat, the technical countermeasures that can be deployed and the responses of governments and financial regulators. In particular, the report will look at:

  • Addressing Systemic Risk: Quantum computing threats and why the ability to break the commonly-used Rivest-Shamir-Adleman (RSA) and Elliptic Curve Cryptography (ECC) encryption protocols poses a systemic risk to financial data security.
  • Increasing Urgency of the Problem: Why recent breakthroughs in quantum computing manufacturing technologies are accelerating development in the field and increasing the urgency of addressing the problem across the financial services industry.
  • Regulatory and Institutional Preparedness: Standards bodies, such as the US National Institute of Standards and Technology, central banks including the US Federal Reserve, European Central Bank (ECB), Bank of International Settlements (BIS) and financial regulators, are pushing for the adoption of post-quantum security frameworks.
  • The Transition to Quantum-safe Cryptography: Banks and financial institutions are evaluating lattice-based encryption, quantum key distribution (QKD) and hybrid cryptographic models as they emerge.
  • Roadblocks to Adoption: Integration into existing financial infrastructures remains a major challenge and there are some who draw parallels with the Y2K Millenium Bug at the end of the last century and call for co-ordinated cross-industry effort to address the problem.

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Table of Contents

  • 1.0 Crunch Time for Cryptography
  • 2.0 The Quantum Threat to Existing Protocols
    • 2.1 The Good News: Quantum Also Enables ‘Uncrackable’ Encryption
  • 3.0 International Efforts to Create Quantum-Resistant Protocols
    • 3.1 Quantum-Resistant Protocols Abound
    • 3.2 Implementation Challenges: from Theory to Practice
  • 4.0 Appendices
    • 4.1 Table of Figures
    • 4.2 Glossary of Terms