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- European financial watchdogs warned that quantum computing could undermine cryptography used to secure blockchains, transactions and financial databases.
- The European Banking Authority, EIOPA and ESMA issued the warning in their Sept. 23 financial risk update.
- ESMA did not predict when capable quantum hardware will arrive, noting practical applications remain at an early experimental stage.
European financial watchdogs have warned that quantum computing could undermine cryptography used to secure blockchains, transactions and financial databases, urging firms to prepare before machines capable of breaking current systems become available.
The European Banking Authority, European Insurance and Occupational Pensions Authority and European Securities and Markets Authority issued the warning in their Sept. 23 financial risk update. The agencies said quantum-related security risks could materialize before the technology delivers commercially viable applications.
Public-Key Cryptography Faces First Major Quantum Threat
Blockchain networks rely on digital signatures, public-key cryptography, hash functions and, in some cases, zero-knowledge proofs to secure transactions and ownership.
ESMA said sufficiently advanced quantum computers running Shor’s algorithm could break widely used public-key systems including RSA and elliptic-curve cryptography. ECC underpins digital signatures used across blockchain networks.
Current machines cannot perform attacks at that scale. ESMA said such attacks remain beyond existing noisy intermediate-scale quantum, or NISQ, devices. The concern is therefore the time required to replace cryptographic systems before sufficiently powerful fault-tolerant quantum hardware emerges.
Grover’s Algorithm Could Give Quantum Systems an Edge in Proof-Of-Work Mining
Quantum computing could also affect proof-of-work networks beyond private-key security. ESMA cited research indicating that Grover’s algorithm could provide a quadratic speedup over classical systems for proof-of-work calculations, potentially impacting Bitcoin and other mined crypto assets if sufficiently capable hardware becomes available.
ESMA did not predict when that capability will arrive. It said practical quantum blockchain applications remain at an early experimental stage and depend on further advances in hardware and system architecture.
EU Targets Post-Quantum Transition for Critical Systems by 2030
The EU is already coordinating a move toward post-quantum cryptography, using algorithms designed to withstand both classical and quantum attacks.
Member states should begin transitioning by the end of 2026, while high-risk use cases and critical infrastructure should move to post-quantum protection as soon as possible and no later than the end of 2030.
Separately, the Digital Operational Resilience Act already requires financial firms to manage ICT risks and maintain controls protecting cryptographic keys.
The Sept. 23 warning does not identify an immediate quantum attack against Bitcoin, Ethereum, or another blockchain. It instead places preparation for future cryptographic weaknesses on the financial sector’s current security agenda.
