Quantum computing threat to financial systems exposed by Hudson

June 7, 2023 - TuxCare PR Team

A detailed paper provided by Hudson Institute experts sheds light on the major consequences of quantum computing on the global financial system. The vulnerability of the Federal Reserve’s bank-to-bank transaction networks, known as Fedwire, and the potential for disruptive events in the aftermath of quantum incursion are of special concern.

The paper emphasizes the confluence of numerous elements that heighten the dangers presented by quantum-enabled assaults. It underlines Fedwire’s reliance on digital security mechanisms, which would be vulnerable to quantum incursion, as well as the centralized operational architecture and concentrated network topology. These characteristics, when combined, considerably increase the risk of a systemically disruptive event, perhaps resulting in a catastrophe of unparalleled size.

The paper notes that estimates of possible financial damages from a quantum computer breach are imprecise, and consistent with a growing body of literature emphasizing the importance of developing post-quantum encryption. This preventive strategy is critical for reinforcing classical computer systems against the looming threat of quantum decryption, preventing major financial disasters.

Despite the industry’s anticipated benefits from quantum computing, such as increased processing efficiency and precision, the potential of quantum-enabled assaults remains large. The prospect of quantum decryption, in particular, offers a considerable problem that may exceed the benefits. A series of quantum attacks on large banks, the Federal Reserve, or stock and derivative markets may have disastrous effects the entire economy. The potential consequences of such an assault dwarf those of the 2008-09 financial crisis or the Great Depression, ringing alarm bells across the sector.

The researchers demonstrated the terrifying consequences of a quantum computer hack on macroeconomic financial institutions. It estimates an indirect GDP loss ranging from $2 trillion to $3.3 trillion. A quantum-enabled cyberattack on Fedwire, or any other system within the area of Real-Time Gross Settlement (RTGS) or important financial market infrastructure (FMI), would result in catastrophic financial losses on a national scale, according to the report’s summary.

Experts argue for proactive strategies to fight this growing threat, mirroring proposals circulated inside federal advisory committees. They also advocate for the development of a post-quantum strategy led by the Federal Reserve in partnership with lending institutions. Furthermore, there is a request for the Federal Reserve’s 12 member banks to embrace post-quantum cybersecurity requirements within a timeframe set by Congress.

The sources for this piece include an article in Nextgov.

Summary