Trust crash 🔓

Every share and bond traded, every financial record, every payment everywhere is anchored and secured by cryptographic equations so reliable we hardly think about them. Strings of invisible numbers guarantee that a SWIFT message is authentic, that a securities transfer hasn’t been tampered with, that a broker really does hold the assets it says it does.   

This is your brain on encryption, and the global economy – not to mention web browsing, defence, critical infrastructure, and just about everything that leans on ones and zeros – relies on it. It’s probably a ways off, but the potential moment a quantum computer breaks encryption, a moment dubbed Q-Day, weighs on the minds of financial institutions across the globe. What if we couldn’t trust the figures underpinning finance?

Encryption is as old as secrecy itself. Julius Caesar shifted letters by three to protect messages of military significance, the Caesar cipher. Germany’s Enigma, and its subsequent cracking at Bletchley Park, changed the course of the Second World War. Modern encryption took off in the 1970s with the advent of computer-based cryptography but it was public-key systems like RSA (1978) that made secure digital communication possible. By the 1990s, encryption had moved into everyday life, securing online banking, emails, and e-commerce.

O brave new world

A quantum computer doesn’t calculate with ones and zeros but with qubits, which can be both one and zero at the same time thanks to the spooky physics of quantum superposition. That means they can explore many possible solutions in parallel rather than grinding through them sequentially – ugh – like every single computer currently does, from the one in your pocket to supercomputer El Capitan. Throw in entanglement, where qubits share states no matter how far apart they are and you get a machine that can theoretically perform certain types of computation exponentially faster than the fastest supercomputer.

In a 2019 Google (GOOGL) experiment a 53-qubit processor completed in 200 seconds what would have taken the then-best supercomputer around 10,000 years. A contrived benchmark, sure, but a hint at the scale of exponentially faster.

It’s this next-level technology that will theoretically break encryption. Most of modern finance relies on public-key cryptographic systems like RSA and elliptic curve cryptography. Their security rests on a simple trick: it’s easy to multiply two huge prime numbers together, but almost impossible for a classical computer to work backwards and factor them. A 2,048-bit RSA key, for example, would take today’s best supercomputers longer than the age of the universe to crack. But using Shor’s algorithm a sufficiently powerful quantum computer could factor those giant numbers in hours, not centuries.

World wars, oil shocks, bubbles, pandemics. Finance has weathered them all. That’s because despite the human chaos, records were largely secure and could be trusted. Mostly. Quantum threatens that wobbly axiom. Humans’ unparalleled success as a species is partially down to their ability to conjure “imagined realities”, of which money, economic systems, and finance are just a few. Markets are belief engines and if investors, traders, and bankers start questioning the numbers on their screens, maybe just as quantum reaches sufficient compute to undermine encryption, markets could seize up simply because people stop believing. 

Is quantum in the room with us right now?

Q-Day isn’t just an “IT problem”. A single reported cryptographic crack could trigger a cascade effect impacting everything from custody chains to clearing houses to central banks – and the rest. A trust crash. 

A trust crash could redraw the financial map. On one side, those that heeded the warnings, adopted post-quantum algos, invested billions in retooling their infrastructure. On the other side, the financial institutions running on spaghetti code, sclerotic regulators, and emerging or declining markets who just weren’t able to catch up, God bless ‘em.

A quantum breakthrough might not announce itself on the front pages of the world’s newspapers. Letting itself in quietly, its effects might bubble to the surface in the form of strange anomalies. In finance, that could mean trades placed with uncanny timing, accounts that don’t reconcile, contracts altered with no way to prove foul play, perpetrator unknown. 

Markets would probably continue ticking along. But they might start making less sense. Innovation, strategy, all that human nous could become increasingly irrelevant as the world grapples with a god machine that can simulate quantum mechanics, cure cancer, and solve the climate conundrum. Post-encryption, the idea of free and fair markets could start to dissolve, replaced by a new ‘invisible hand’.

All watched over by machines of loving grace

Q-Day sounds like a sequel to Y2K. Another technical deadline that could upend global stability if ignored. Planes won’t fall out of the sky, but like Y2K preparation for Q-Day requires re-engineering the foundations across thousands of legacy systems, many of which no one has touched in decades. Unlike Y2K nobody knows when, or even if, Q-Day will arrive. 

Nations across the globe are almost certainly quantum prepping, hoovering up encrypted data under a ‘harvest now, decrypt later’ policy. Data, contracts, and transactions secured today may already be in vaults, waiting to be creaked open in the 2030s and beyond. 

‍Moody’s (MCO) has warned that migrating global finance onto post-quantum cryptography could be one of the most disruptive, and costly, systemic shifts in decades. Europe’s FBI, through its Quantum Safe Financial Forum, has urged the continent to begin transitioning now, stressing quantum threats may arrive in 10–15 years. Maybe sooner. One of Joe Biden’s last hurrahs as president was an executive order strengthening US cybersecurity in the face of AI and quantum computing. 

The Global Risk Institute, which surveyed cybersecurity experts last year, points to a one-in-three chance that Q-Day happens before 2035. And the chance there is already an encryption-breaking quantum computer humming away in a secret government bunker somewhere? Around 15%.

Don’t believe the hype

Despite the doom and gloom, quantum’s potential breakthroughs in drug discovery, climate modelling, logistics, and materials science may make it worth the risk. Quantum algos could be put to work dreaming up new antibiotics or optimising national power grids. As a result, the US, China, and Europe’s quantum labs are very well funded, as are firms like IBM (IBM), Google, and Microsoft (MSFT).

Here comes the ‘but’. Quantum computers are obviously not your typical computer. They live in what look like futuristic chandeliers, hanging inside dilution refrigerators. Most qubit designs only function at fractions of a degree above absolute zero, colder than outer space. They also require ultra-high vacuums to stop stray air molecules interfering, magnetic shielding to block background fields, and extreme isolation from vibration and noise.

Thanks to their fussiness, today’s quantum machines are still very prone to errors. Serious breakthroughs are probably decades away. Some experts suggest a useful quantum computer may never arrive at all. Former Cisco (CSCO) CEO John Chambers suggested the real impact of quantum may be 15–30 years down the road. The leading scientific journal, Nature, put it bluntly: quantum computers “can’t yet solve real-world problems”. Some researchers joke quantum is forever 25 years out. And what we do have is propped up on those aforementioned contrived benchmarks.

Despite this bearishness, quantum computing stocks don’t care if the science isn’t ready. Names like D-Wave (QBTS) have surged in the last year, in part driven by the excitement of a breakthrough that may never happen. Investors should proceed with caution before dipping their toe into these volatile stocks.  

Maybe Q-Day isn’t around the corner but a dot on the horizon. Maybe the apocalypse won’t arrive in a sudden snap, but as a slow erosion of trust as the technology inches closer. Either way, finance isn’t off the hook. The threat isn’t the machine, it’s doubt. Doubt alone can crack the foundations of trust. Trust in encryption, trust in markets, trust in finance.

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