How Are Financial Institutions Preparing for the Quantum Financial System?

By Ibtisam AbbasiReviewed by Louis CastelNov 18 2025

The conceptual framework of Quantum Financial System (QFS), involving the integration of quantum computing into the financial world, will prove to be key for improving the security and accessibility of transactions. Traditional financial systems, which involve the use of conventional computing and cryptographic techniques, are prone to cyberattacks, and hackers are utilizing quantum computers to disrupt financial architectures worldwide. In this regard, quantum computing proves to be revolutionary for providing next-gen encryption and enabling ultra-fast data processing for real-time, seamless, and safe settlement of transactions all over the world.¹

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What is the QFS?

The key advantages offered to the QFS via the integration of quantum cryptography, quantum computing, blockchain technology, and artificial intelligence (AI) will usher us into a new era of finance. Particularly, novel technologies such as quantum ledger systems (QLS) and their further advancements like Quantum-Resilient Privacy Ledger (QRPL), along with novel cryptographic techniques, are ensuring immaculate safety and privacy during financial transactions.

The novel frameworks and currency architectures within the QFS are integrated with novel standardized post-quantum cryptography (PQC) techniques accepted by the National Institute of Standards and Technology (NIST). Traditional cryptographic methods prove to be futile when faced with the threat of quantum computers; with novel methods like Hash-based digital algorithms proving to be highly successful against traditional and novel quantum cyber-attacks.

The QLS systems often employ hash-based signatures like XMSS, utilizing a Merkle tree to ensure post-quantum security. Its advancements, like QRPL, utilize Module-Lattice-based Key Encapsulation Mechanism (ML-KEM) and Stateless Hash-based Digital Signature Algorithm (SLH-DSA), which are unaltered even by modern quantum algorithms such as Shor’s algorithm.²

Why are Financial Institutions Paying Attention?

Typically, traditional cryptographic algorithms such as the Rivest–Shamir–Adleman (RSA), DSA, and ECDSA were used in financial architectures that operated by using the computational difficulty involving the factorization of large integers. However, modern quantum computing-based algorithms such as Shor’s algorithm can solve the factorization problem and are able to calculate discrete logarithms. This allows quantum computers utilizing Shor’s algorithm to discover and reconstitute the specialized, unique private key allocated for each financial transaction. This puts the systems operating on these conventional algorithms highly susceptible to quantum attacks.³

An Overview of Post Quantum Cryptography (PQC)

The interesting field of post-quantum cryptography is critical for developing algorithms unharmed by modern quantum attacks. The widely implemented post-quantum cryptography algorithms include Lattice-based cryptographic techniques, code-based cryptography methods, hash-based cryptographic algorithms, and multivariate polynomial cryptography.

Lattice-based, highly complex codes like the Shortest Vector Problem (SVP) are the core reason behind the safety of lattice-based cryptography. The highly complex linear decoding of error-correcting codes like the Goppa codes makes code-based cryptography techniques highly effective against quantum-based threats.

Hash-based systems work by using highly advanced cryptographic hash functions, which provide unique and complex digital signatures for each financial transaction without any dependency, making them resilient towards hackers. The multivariate polynomial cryptographic algorithms utilize highly complex polynomial equations to impart them with computational complexity and protection against modern cyber-attacks.⁴

Recent PQC Selections by NIST

Recently, NIST, as part of its post-quantum cryptography standardization scheme, has collaborated with various partners and selected CRYSTALS-Kyber and HQC as key encapsulation mechanisms (KEMs), with CRYSTALS-Dilithium, Falcon, and SPHINCS+ implemented as standard digital signature schemes due to their unmatched security and scalability. The CRYSTALS-Kyber is a lattice-based KEM, while HQC works by implementing a code-based solution. CRYSTAKS-Dilithium and Falcon signature schemes are efficient against quantum attacks due to the lattice-based algorithm, while SPHINCS+ is a hash-based scheme that will prove to be key in enhancing financial security and integrity for banks in the future.

These PQC algorithms have outperformed conventional tools without any effect on execution efficiency under both optimized and isolated conditions. It is expected that post-quantum cryptography algorithms will be a key part of the advanced 5G and 6G communication networks in the next decade. Furthermore, these novel PQC standards are not reliant extensively on hardware replacements; rather, software tweaks may prove to be useful in boosting the resilience of financial systems against cyber-attacks.⁵

Quantum Key Distribution (QKD): Providing Security to Giants like JPMorgan Chase and Toshiba

QKD is critical for QFS as it leverages quantum mechanics to ensure detection of even minimal threats along with a strict mitigation avenue. Modern QKD systems may be discrete-variable QKD (DV-QKD) or continuous-variable QKD (CV-QKD). DV-QKD utilizes single-photon measurements and computations for safely transmitting digital financial credentials. CV-QKD operates by utilizing quadratic measurements of light fields and is highly compatible with fiber-optic infrastructure and modern optical devices. QKD protocols like BB84 and E91 are maturing extensively and are expected to be key for 6G infrastructures, making financial transactions and government communication secure and reliable.⁶

A recent breakthrough was made by JPMorgan Chase in partnership with Toshiba and Ciena, where they tested the functionality and viability of a novel QKD network, which was resistant to extremely harmful quantum-algorithm cyber-attacks, and supported a data transfer rate of around 800 Gbps.

Furthermore, the QKD system was resilient and ruthless against eavesdroppers, and successful deployment tests verified its use for securing Kinexys, the world’s first financial, peer-to-peer blockchain network. Toshiba’s Multiplexed QKD system infrastructure was used by the research team, providing security guarantees using quantum physics law and providing an industry-ready QKD system ⁷

Quantum Readiness: Steps Taken by Financial Institutions

A Novel Quantum Security and Risk Management Framework for Organizations

Companies and researchers are devising thorough plans to survive in the quantum era. Recently, experts have devised the first-of-its-kind framework titled the Quantum-Ready Architecture for Security and Risk Management (QUASAR). It involves a deep risk assessment in the initial phases by identifying all systems relying on cryptographic protocols. The next step is mapping the flow of digital data related to financial transactions and the cryptographic dependencies.

The complete infrastructure analysis includes the cataloging of all the cryptographic protocols, documentation of key lengths, and identification of systems relying on conventionally weak algorithms like RSA. It is then followed by the modulation of cryptographic interfaces and the creation of abstract layers of quantum resilient layers for cryptographic operations, allowing for easy replacement of conventional algorithms.

Only NIST standardized PQC algorithms are to be implemented after rigorous testing in a non-production environment. Furthermore, procurement, business innovation, and training policies all must be developed and implemented in line with the post-cryptographic quantum era principles to ensure readiness and optimized operations.⁸

HSBC Investing to be Pre-prepared for QFS Era

HSBC is a leading company when it comes to adopting QFS and its associated frameworks for next-generation financial technology. They became the first institution to test a quantum-secured framework for the purchase and sale of tokenized gold. It is the first bank to utilize the distributed ledger technology (DLT) for providing institutional investors with access to tokenized physical gold. The PQC framework allowed HSBC to move the digital assets swiftly via secure quantum networks.⁹

Companies Promoting Quantum Cryptographic Software and Algorithm Development

Several companies are investing in developing quantum software and algorithms to aid enterprises, companies, and governments in achieving their goals. Their quantum dedicated software suite, Construct, is integrated with a Resource Analyzer, which analyzes resource hotspots to optimize quantum algorithm performance.¹⁰

Another major company, Quantinuum, in collaboration with Mitsui & Co., Ltd. and NEC, has successfully verified the safe delivery of quantum tokens across a 10km fiber optic link. These tokens are financial instruments revolutionizing asset trading using QKD networks. This move proves to be critical, especially for financial sector stakeholders like global banks.¹¹

Technical Challenges

While PQC may seem like the most useful solution to conventional cybersecurity problems in the quantum financial era, certain challenges still need to be overcome to make the framework completely practical. First of all, PQC keys constructed using the encryption of modern algorithms like hash-based frameworks are considerably larger in size, increasing the need for computational power, which leads to a massive hike in cost.

Furthermore, the integration of real-time quantum cryptographic services within existing network architecture to synchronize the data-flow between the hardware components and software suite is a highly complex and challenging task.¹²

Challenges to the Financial Sector

The stability and reliability of QFS are highly dependent on post-quantum cryptography, with advanced decryption algorithms proving to be a major threat to financial transactions. Quantum-enabled cyber-attacks have taken place, like the case study of Fedwire Funds Service, which contained data regarding government institutions.

The lack of stability and standardization of post-quantum cryptography for QFS is a big challenge that is hindering the practical applicability of this framework. This makes the shift from conventional systems to quantum-safe cryptographic architectures highly complex and time-consuming, with experts estimating at least another decade for the technology to become much more stable and mature. However, steps like Project Leap, which is a joint effort between BIS Innovation Hub, Eurosystem, Bank of France, and the Deutsche Bundesbank, are proving to be key for fortifying the defense of the financial sector against quantum-cyber threats. These projects will be key for establishing quantum-safe communication and data transfer routes all over the world.¹³

What Does the Future Hold?

The intersection of digital technologies like quantum sciences and AI will be a game-changer for a quantum-resilient financial system. Quantum-enhanced machine learning (ML) algorithms with ultra-fast dataset processing powers will be key for utilizing superposition and quantum entanglement to ensure secure and ultra-fast algorithms for post-quantum cryptography, along with stable frameworks for financial forecasting.¹⁴

Experts also believe that concepts like Immutable Identity Ledgers in the future will make it very difficult to allow credential forgery and allow financial institutions to reduce operational costs. These technologies are expected to operate by using a continuous authentication and authorization framework, enabling this blockchain-based system to completely eradicate vulnerable points from the centralized network.¹⁵

When it comes to quantum progress and funding, in countries like the U.S and the U.K., several private companies like IBM and IonQ are working independently as well as in collaboration with the government to ensure the maturity of quantum systems for the finance sector. On the other hand, China is dominated by government-based projects and funding, with over 4 times the public funds being invested by the Chinese government to ensure advancement in quantum sciences. While the U.S. approach seems to be much more balanced, the availability of funds to researchers by the Chinese government makes the quantum race very interesting.¹⁶

Want to know more about quantum economy? Read this exclusive interview

Further Reading

1. Ministry of Foreign Affairs and International Cooperation, Fiji (2025). Quantum Financial System Start Date. [Online]. Available at: https://recruit.foreignaffairs.gov.fj/book-search/E0G485/313714/QuantumFinancialSystemStartDate.pdf [Accessed on: November 05, 2025]
2. Bahar, S. (2025). Quantum-Resilient Privacy Ledger (QRPL): A Sovereign Digital Currency for the Post-Quantum Era. Emerging Technologies (cs.ET); Cryptography and Security (cs.CR). Available at: https://doi.org/10.48550/arXiv.2507.09067
3. Matier, J. (2018). Quantum Resistant Ledger (QRL). The Quantum Resistant Ledger Organization [[email protected]] on GitHub. Available at: https://github.com/theQRL/Whitepaper/blob/master/QRL_whitepaper.pdf [Accessed on: November 06, 2025].
4. Mamatha, G. et. al. (2024). Post-Quantum Cryptography: Securing Digital Communication in the Quantum Era. Available at: https://doi.org/10.48550/arXiv.2403.11741
5. Demir, E. et. al. (2025).Performance Analysis and Industry Deployment of Post-Quantum Cryptography Algorithms. arXiv. Available at: https://doi.org/10.48550/arXiv.2503.12952
6. Chhetri, G. et. al. (2025). Post-Quantum Cryptography and Quantum-Safe Security: A Comprehensive Survey. arXiv.org. 282057217. Available at: https://doi.org/10.48550/arXiv.2510.10436
7. Pistoia, M. et. al. (2024). Paving the way toward 800 Gbps quantum-secured optical channel deployment in mission-critical environments. Quantum Science and Technology. 8(3). 035015. Available at: https://www.doi.org/10.1088/2058-9565/acd1a8
8. Weinberg, A. et. al. (2025). Preparing for the Post Quantum Era: Quantum Ready Architecture for Security and Risk Management (QUASAR) -- A Strategic Framework for Cybersecurity. arXiv. Available at: https://doi.org/10.48550/arXiv.2505.17034
9. HSBC. (2024). HSBC pilots quantum-safe technology for tokenised gold. Available at: https://www.hsbc.com/news-and-views/news/media-releases/2024/hsbc-pilots-quantum-safe-technology-for-tokenised-gold [Accessed on: November 8, 2025].
10. PsiQuantum (2025). Construct. [Online]. Available at: https://www.psiquantum.com/software [Accessed on: November 09, 2025].
11. Quantinuum (2024). Quantinuum together with Mitsui advance unforgeable quantum tokens over fibre network in first ever trial. [Online]. Available at: https://www.quantinuum.com/press-releases/quantinuum-together-with-mitsui-advance-unforgeable-quantum-tokens-over-fibre-network-in-first-ever-trial [Accessed on: November 09, 2025].
12. Rawal, B. (2024). Challenges and opportunities on the horizon of post-quantum cryptography. APL Quantum. 1(2). 026110. Available at: https://doi.org/10.1063/5.0198344
13. Auer, R. et. al. (2024). Quantum computing and the financial system: opportunities and risks. BIS Papers. 149. [Online]. Available at: https://www.bis.org/publ/bppdf/bispap149.pdf [Accessed on: November 10, 2025].
14. Marmon, S. et. al. (2025). The Future of Financial Forecasting: How AI and Quantum Technologies Will Transform Global Markets. Available at: https://dx.doi.org/10.2139/ssrn.5234109
15. Mallesh, A. (2025). Immutable Identity Ledger: Revolutionizing Secure Credential Management With Blockchain Technology. International Research Journal of Modernization in Engineering Technology and Science. 7(3). 2582-5208. Available at: https://www.doi.org/10.56726/IRJMETS70575
16. Hmaidi, A. et. al. (2024). China’s long view on quantum tech has the US and EU playing catch-up. Mercator Institute for China Studies. [Online]. Available at: https://merics.org/en/report/chinas-long-view-quantum-tech-has-us-and-eu-playing-catch#:~:text=As%20opposed%20to%20other%20countries,public%20investment%20in%20quantum%20technology. [Accessed on: November 11, 2025].

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