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Quantum computers could crack the cryptography that underpins financial stability

IMF | José Deodoro, Michael Gorbanyov, Majid Malaika, and Tahsin Saadi Sedik | Nov 23, 2021

Quantum computing - Quantum computers could crack the cryptography that underpins financial stability

Quantum computers can reach a level of optimization that would crack many of today’s encryption keys in less time than it takes to generate them using conventional digital computers.

Financial institutions should future-proof their cybersecurity systems without delay. Failure to do so will imperil financial stability.

Increasing the number of qubits delivers an exponential rise in calculation processing speed. Two traditional binary bits are needed to match the power of a single qubit; four bits are required to match two qubits; eight bits are needed to match three qubits; and so on. It would take about 18 quadrillion bits of traditional memory to model a quantum computer with just 54 qubits. A 100 qubit quantum computer would require more bits than there are atoms on our planet. And a 280 qubit computer would require more bits than there are atoms in the known universe.

The possibilities

Complex computational tasks are like finding the way out of a maze. A traditional computer would try to escape by following every path in sequence until it reached the exit. Superposition, by contrast, allows a quantum computer to try all the paths at once. This drastically reduces the time to find a solution.

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A Quantum Leap for Financial Services

By solving problems with more accuracy and speed than digital computers, quantum computers have the potential to accelerate scientific discovery and innovation, revolutionize financial market modeling and simulations, and empower machine learning and artificial intelligence. They could be used to model subatomic particles, molecular interactions, and chemical reactions. This could revolutionize chemical engineering and material science and allow the design of new materials, such as solid-state batteries. Quantum computers could also help us understand climate change.

Quantum computers could transform the financial system, too. They could perform more accurate Monte Carlo simulations—used to predict the behavior of markets through pricing and risk simulations—almost in real time. There would be no need to simplify these models with unrealistic assumptions. Quantum computers could also solve optimization tasks—such as allocating capital, determining portfolio investments, or managing the cash in ATM networks—in a fraction of the time it takes digital computers. Quantum computers could also speed the training of machine learning algorithms. The time it takes digital computers to do this increases exponentially with each dimension that is added. Not so with quantum computers.

Race against the machine

The race to develop new quantum-safe encryption standards and algorithms has begun already. In the United States, the National Institute of Standards and Technology is running a competition to develop quantum-safe encryption algorithms. It hopes to announce a winner by 2024. The European Telecommunications Standards Institute is also taking a lead. These efforts are feeding into the activities of other standard-setting bodies. Because of retroactive risks, however, financial institutions have a narrow window to implement the new standards.

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Financial institutions must take immediate steps to prepare for a cryptographic transition. They should start by assessing retroactive and future risks from quantum computers, including from information that may already have been captured and can be exploited years later

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