Paper calls for central banks to lead preparations for looming security risk.

The prospect of quantum computing poses an imminent threat to financial industry security, demanding urgent attention, according to a new paper from researchers at the Bank for International Settlements.

The paper — by a team of researchers including personnel from the Bank of Canada, the University of Waterloo, the BIS and the Bank of France — examines the risk to prevailing methods of data encryption from quantum computers, which would be vastly more powerful than traditional machines and theoretically capable of breaking the security standards currently used in the financial industry.

“Trust in the financial system is fundamentally tied to the trust provided by cryptography,” the paper states, noting that robust encryption is needed to protect financial information, transactions and “the smooth operation of the broader economy.”

While the timeline for the deployment of quantum computers capable of cracking current encryption standards remains uncertain, “the ability of quantum computers to break today’s cryptographic algorithms represents an imminent threat to the financial system,” the paper warned. The risk calls for an urgent response, it added.

“Due to the long-term sensitivity of financial data, vulnerable cryptography must be replaced by new, quantum-safe solutions well before quantum computers reach maturity,” it said.

The challenge isn’t just a matter of replacing existing algorithms — it requires a transition to “quantum-safe cryptographic infrastructures” that needs to begin immediately, the paper argued. It outlines a proposed roadmap for that transition, starting with “raising awareness, through planning, to executing cryptographic migration.”

The paper also recommends that central banks lead the way in this transition.

“With their long-term perspective, central banks can promote a proactive, systemic approach and help create the alignment necessary for coordinated action across the global financial system to ensure the continued security and integrity of financial data,” it concluded. “The time to act is now.”