Cybersecurity

Quantum-secure financial sector: 4 principles to inform global regulatory approaches

Building a secure, resilient financial ecosystem in the quantum era.

Building a secure, resilient financial ecosystem in the quantum era. Image: Getty Images/iStockphoto.

Filipe Beato
Lead, Centre for Cybersecurity, World Economic Forum
Giulia Moschetta
Research and Analysis Specialist, Centre for Cybersecurity, World Economic Forum
Pavle Avramovic
Manager, Emerging Tech & Research, Data Technology & Innovation, Financial Conduct Authority
Charlie Markham
Senior Associate, Emerging Tech & Research, Data Technology & Innovation, Financial Conduct Authority
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Cybersecurity

This article is part of: World Economic Forum Annual Meeting
  • Quantum computing provides disruptive opportunities to the financial sector, by advancing complex operations with projected investment expected to reach $19 billion by 2030s.
  • Mitigating the quantum security threat is needed to fully harness these opportunities, and global regulatory approaches can trigger harmonized action.
  • Four principles and a roadmap for transition act as strategic tools to catalyze dialogue, guide decision-making, and inform global regulatory approaches towards a quantum-secure transition.

In an era marked by rapid digitalisation, the financial sector is in the midst of a transformation driven by different emerging technologies. Among those, quantum computing stands out in terms of disruptive opportunities. This technology has the potential to solve certain complex mathematical problems significantly faster than classical computers.

Why is quantum computing important for the financial sector?

The potential for disruption in the financial sector generates the opportunity for competitive advantage in multiple areas. This notion is highlighted in the sector’s significant investment to harness quantum innovation, with a projected rise from $80 million in 2022 to $19 billion by 2032, and potentially reaching up to $850 billion over the next 30 years. This surge in investment is underpinned by the sector’s pursuit of advancements in Monte Carlo simulations, portfolio optimization and complex derivative calculations, with the potential to add approximately $700 billion in business value by 2035.

“Quantum computing presents considerable opportunities but also threats. The financial sector relies heavily on encryption to protect sensitive information, the exposure of which could cause significant harm to consumers and markets. Addressing this requires a truly collaborative effort to transition to a quantum-secure future.” said Suman Ziaullah, Head of Technology Resilience & Cyber, Financial Conduct Authority.

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While the sector’s innovators focus on harnessing these opportunities, it is equally important to prepare for potential quantum-enabled cybersecurity threats. At the core of this quantum dilemma lies the technology’s potential to render some current encryption schemes obsolete, threatening the security of digital infrastructures, communications and data. Such a scenario would not only undermine cybersecurity but also erode the foundation of trust and stability upon which financial services operate. This vulnerability poses a serious threat to the integrity of digital infrastructures within the financial industry.

How to approach the challenge?

Addressing quantum-enabled cybersecurity risks in the financial sector is a complex task. It goes beyond technological adaptation, demanding an overhaul of cryptographic protocols that provide the backbone for the security of the sector. This process is further complicated by the uncertain timeline for quantum advancements and the readiness for quantum-resistant technologies.

Both public and private sectors are taking initiatives in specific regions, with the US setting a quantum-secure transition milestone for 2035 and its National Institute of Standards and Technology (NIST) leading international efforts to establish standards and guidance on post-quantum cryptography solutions by 2024.

While recognition of the quantum threat is growing among governments, regulators and industry, a tangible action plan to have global and harmonized regulatory approaches remains elusive. Further challenges driven by the complexity of quantum arise in several other areas, such as skills and knowledge, policy and guidance, long-term cybersecurity priority management, and the high resource-intensity of migrating and upgrading the complex financial infrastructure. Moreover, the interconnected nature of global financial systems means that changes in one area can have far-reaching implications, necessitating a coordinated and informed approach to manage this transition effectively.

In recognising the need for a coordinated approach, the World Economic Forum, in collaboration with the Financial Conduct Authority (FCA), initiated an international dialogue convening financial regulators and central banks from across the globe, industry leaders, and academic experts. Through a series of roundtables and discussions, participants shared knowledge and insights, fostering a unified understanding of the quantum challenges and opportunities within the financial sector.

“The quantum economy era is fast approaching and we need a global public-private approach to address the complexities it will introduce. We welcome this opportunity to collaborate with the Financial Conduct Authority to chart the roadmap for a seamless and secure transition for the financial services sector to the quantum economy." said Sebastian Buckup, Head of Network and Partnerships; Member of the Executive Committee, World Economic Forum.

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How is the Forum tackling global cybersecurity challenges?

4 principles to inform global regulatory approaches on quantum-security

The work programme resulted in a joint white paper Quantum Security for the Financial Sector: Informing Global Regulatory Approaches. The paper provides four guiding principles along with a roadmap that serve as a blueprint for both industry and regulatory authorities to reduce complexity and align their activities throughout the transition.

  • Reuse and repurpose: This principle encourages leveraging existing tools and frameworks to address quantum-enabled cybersecurity risks.
  • Establish non-negotiables: Calls for defining overarching requirements that are essential in addressing quantum security issues.
  • Avoid fragmentation: Focuses on a global approach to avoid regulatory fragmentation across markets.
  • Increase transparency: Urges the exchange of strategies and approaches to enable a quantum-secure transition.

The four principles are overarching and inform potential actions throughout the transition to a quantum-secure economy. The transition to a quantum-secure economy is not just a technological shift but a comprehensive transformation of the financial sector’s approach to stakeholder collaboration, cryptographic management and cybersecurity. As such, this transition is not a race, but a strategic journey, requiring sustained collaboration and focused action among stakeholders across international boundaries.

What are the steps to ensure a quantum-secure journey?

The roadmap presented in this paper, outlines a structured approach to navigating the intricacies of this transition, providing a clear pathway for stakeholders to begin the complex process of transitioning to a quantum-secure economy. The roadmap consists of four distinct phases: Prepare, Clarify, Guide, Transition and Monitor, where each phase builds on the previous, addressing the complexity of the transition in a sequential yet interconnected manner.

  • Prepare: Focus on raising awareness about quantum risks and building internal capabilities.
  • Clarify: Refine understanding and approaches towards the quantum-secure transition.
  • Guide: Move beyond preparation to actively shape transition strategies and develop global best practices.
  • Transition and monitor: Implement the strategies developed through earlier stages to transition from adaptation to innovative action.

The journey towards a quantum-secure financial sector is complex, yet the severity of quantum cybersecurity risks, coupled with the short time available to prepare, provide the motivation to act and the opportunity for all financial sector stakeholders to take appropriate, proactive measures. These four principles and roadmap outline a starting point for continued stakeholder collaboration to ensure that the financial sector transitions to a secure, stable and trusted financial ecosystem in the quantum economy.

As the financial sector embarks on this transformative journey, the Forum and FCA invite ongoing engagement from all stakeholders. This initiative represents a significant step towards ensuring a secure, resilient financial ecosystem in the quantum era.

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Related topics:
CybersecurityDavos AgendaFinancial and Monetary Systems
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