Crypto firms prepare defenses as quantum threat to encryption draws nearer

By Hannah Lang

NEW YORK, July 8 (Reuters) - The cryptocurrency industry is starting to prepare for the threat of quantum computing as recent advances fuel concerns that the technology could soon be able to crack the cryptography that protects transactions and digital wallets. 

Quantum computers can solve complex mathematical problems much faster than today's sophisticated computers, and could be used to unscramble conventional methods for encrypting digital information. That spells trouble for the $2 trillion global cryptocurrency market, which is based on blockchains secured by old-school cryptography and already has a history of major hacks. 

While the technology remains largely experimental, crypto industry concerns have grown since March research from Alphabet's Google, one of several tech giants pioneering the technology, suggested quantum computers may be able to break that cryptography sooner than previously expected, according to executives and analysts. Google has said that quantum computers capable of breaking encryption could arrive by 2029, whereas previously they were seen as at least a decade out.

Recent research from Citigroup and others has also concluded that quantum computing, along with artificial intelligence breakthroughs, has compressed the time frame in which cryptocurrencies will become widely vulnerable to hackers.

Acknowledging the risks the technology poses to the public and private sectors, U.S. President Donald Trump last month issued executive orders to bolster U.S. quantum capability. 

Some crypto companies and blockchain developers are already drawing up plans to upgrade their networks with quantum-resistant cryptography, a potentially years-long effort that could require sweeping changes to the infrastructure underpinning digital assets.

"It's the most direct and existential threat towards cryptocurrencies and crypto networks," said Chris Tam, head of quantum innovation at BTQ Technologies, which focuses on quantum security. 

BLOCKCHAINS USE DECADES-OLD CRYPTOGRAPHY

Most blockchains rely on decades-old elliptic-curve cryptography to generate the public and private keys and digital signatures used to verify ownership of crypto assets and authorize transactions. Public keys are mathematically derived from private keys and, in many blockchain networks, become publicly visible once crypto assets are used in a transaction or transferred.

While conventional computers cannot feasibly derive a private key from a public key, a sufficiently powerful quantum computer could potentially do so, allowing hackers to forge digital signatures and authorize fraudulent transactions.

That is a particularly acute risk for public crypto networks where transactions, unlike traditional payments, are irreversible.

“Crypto especially is uniquely exposed because blockchains are transparent and permanent,” said Utkarsh Ahuja, managing partner at Moon Pursuit Capital, a crypto investor. 

Bitcoin, the biggest cryptocurrency, is considered particularly vulnerable because its 17-year history of transactions has generated a large number of visible public keys.

Roughly 35% of the token's circulating supply could be exposed to a quantum computing attack, according to an unpublished June 2026 working paper by independent researcher Ahmed Raza Muhammad Umer. Other research from last year has estimated that figure could be as high as 50%.

Just one incident in which a hacker steals and sells a large amount of a token could tank its price, said Cristiano Ventricelli, vice president and senior analyst of digital assets at Moody's Ratings. "Everyone will feel the impact," he added.

That risk has already prompted some to rethink bitcoin investments. Christopher Wood, the closely tracked global head of equity strategy at Jefferies, in his January newsletter removed a 10% bitcoin allocation from his model portfolio due to the long-term "existential" threat of quantum computing. 

BLOCKCHAIN UPGRADE PLANS TAKE SHAPE

To be sure, Ahuja and others said they believe it will still be a few years before quantum computing can crack blockchains, and that the industry will be able to upgrade to new "post-quantum" types of cryptography resistant to the technology. 

Many crypto executives also warned that moving too early could create vulnerabilities because post-quantum cryptography is still rapidly evolving. Post-quantum digital signatures are generally much larger than traditional signatures, increasing storage and bandwidth requirements. They could raise costs and degrade user experience, particularly on blockchains with fixed block-size limits, such as bitcoin, said Zach Pandl, head of research at crypto asset manager Grayscale, although he added he had confidence blockchains would ultimately address the issues.

"There is an engineering challenge ahead, but there are engineering solutions already on the table," he added.

That challenge could take years to overcome. One senior cybersecurity executive at a major crypto player said he expects it will take two years for his company to become fully quantum-resistant. He and others described the potential work as akin to a Y2K-style overhaul when more than $300 billion was spent globally fixing the "millennium bug."

The problem is especially thorny for blockchains, which are mostly decentralized, meaning they are operated by a community that may not be able to agree on a path forward, said Tam of BTQ Technologies. 

None of the top 20 blockchains have implemented a post-quantum signature algorithm, according to people interviewed for this story. In the case of bitcoin, developers and market participants are divided over which fix to adopt and when to move, executives said. The Ethereum Foundation, which supports the blockchain that underpins ether, the second-largest cryptocurrency, says it is targeting 2029 for full protection from quantum computing. 

"The sort of disaster scenario is that it happens way sooner than we think," said Christopher Smith, CEO of Quantus, a blockchain that already uses post-quantum cryptography.

The Algorand Foundation, which supports the Algorand blockchain,  whose native token has a market capitalization of around $780 million, is among the early movers. It last month published a post-quantum roadmap and plans to start supporting post-quantum accounts later this year, said Bruno Martins, Algorand Foundation's chief technology officer.

"It felt right to start doing (something) now, because it's responsible to have a plan," Martins added.

(Reporting by Hannah Lang in New York; Editing by Michelle Price and Matthew Lewis)