Quantum Cryptanalysis Impact on the Financial Sector
Interview with Alexander W. Butler
Quantum Cryptography
JUNE 19, 2026 / BY VICTOR KERROS
The opinions, interpretations, and conclusions expressed in this article are solely those of the interviewee(s) and do not necessarily reflect the views of their employers, affiliated institutions, or any organizations with which they are associated. The interviewee(s) bear full responsibility for the content.
By 2035, cryptography will be one of the clearest areas where quantum computing delivers exponential advantage, with consequences for the entire digital economy, as explored in our “Quantum Technologies and the Future of Cryptography: Three Scenarios for 2035” piece. Finance is one of the most systemic angles to examine this risk, because trust underpins payments, settlement, market infrastructure, and the credibility of institutions.
What happens if a cryptographically relevant quantum computer emerges before financial institutions have completed migration?
To better understand what’s happening in the field, we had the pleasure to interview Alexander W. Butler, former Associate Director of the Quantum Alliance Initiative at the Hudson Institute and author of Prosperity at Risk: The Quantum Computing Threat to the U.S. Financial System.
We discussed quantum-enabled attacks on financial institutions, Fedwire contagion scenarios, weakest-link vulnerabilities, PQC governance gaps, and why financial stability may depend on cryptographic readiness.
Background
Could you briefly introduce yourself and describe your work related to the impact of quantum computing on the financial system?
I am Alexander W. Butler, an independent national security policy analyst based in Arlington, Virginia. I hold a Master’s degree in National Security Policy from the RAND School of Public Policy and a Bachelor’s degree in Economics from James Madison University, where I focused on macroeconomics and econometrics.
For more than four years, I served as Associate Director of the Quantum Alliance Initiative at Hudson Institute, where I led research design, econometric analysis, project management, and drafting of reports quantifying the economic impacts of quantum-enabled cyberattacks on U.S. critical infrastructure. Our work examined the financial sector, the power grid, and cryptocurrency markets.
My approach has always been rooted in an economic lens rather than a technical one. I view quantum risk not as an abstract technological problem, but as a measurable threat to economic stability that can be mapped, modeled, and mitigated through policy.
One of the most prominent outputs of that work was Prosperity at Risk: The Quantum Computing Threat to the U.S. Financial System, published in 2023. Using original econometric models alongside the Oxford Economics Global Economic Model, we found that a single-day quantum-enabled cyberattack impairing access to the Fedwire interbank payment system could cost the U.S. economy between $2 trillion and $3.3 trillion in indirect impacts alone, with annual real GDP declines ranging from over 10% to 17% in the worst-case scenario.
Before Prosperity at Risk, I also authored a fictional narrative scenario chapter, Quantum Tuesday: How the U.S. Economy Will Fall and How to Stop It, for a Wiley anthology on the convergence of quantum and AI, which described the major attack scenario we ended up modeling in 2023.
Since leaving Hudson, I have continued to examine these issues through a national security lens, focusing not only on financial system vulnerabilities themselves, but also on their implications for U.S. strategic competitiveness, particularly as the United States lags behind some of its peers in post-quantum cryptography governance and mitigation.
On the Quantum Threat
From your experience, what concerns financial executives most today when discussing the quantum threat? Has the conversation evolved in recent years?
The conversation has changed significantly especially since that Prosperity at Risk report I authored in 2023. Just a few years ago, discussions were focused on basic questions: What is this? Is it real? When will it become a threat?
Today, the discussion has evolved toward mitigation. Board members and C-suite executives are asking: Who owns this migration process? Can we actually complete it in time?
Several factors have driven this shift. First is the compression of the quantum decryption timeline, driven by advances in both hardware and algorithms. Researchers continue to reduce the resources required for cryptographic attacks, while AI and agentic tools are increasingly being used to accelerate quantum R&D.
Second, the publication of NIST’s post-quantum cryptography standards in 2024 transformed the issue from a theoretical concern into an operational one. Suddenly, the U.S. government was saying: this is a real threat, and this is what organizations should do about it. That was reinforced by validation from institutions such as the Bank for International Settlements1, JPMorgan2, and Citibank3.
What concerns executives most today is no longer whether the threat is real. It is the harvest now, decrypt later problem. That threat transforms an uncertain future capability into a present-day liability. Organizations worry about whether they can complete migration before long-shelf-life data collected today becomes vulnerable.
The key challenge is that awareness has increased, standards now exist, and guidance is available, but concrete action remains limited. The scale of the migration effort and the volume of data involved remain enormous obstacles.
In a scenario where cryptographically relevant quantum computers (CRQCs) become operational before migration is complete, what parts of the financial system architecture are likely to fail first?
The systems most vulnerable in that scenario are those protected by cryptographic schemes susceptible to Shor’s algorithm, including RSA, elliptic curve cryptography, and Diffie-Hellman.
The primary danger is not simply that an adversary can read encrypted communications. Much of that data may already have been collected through harvest-now-decrypt-later operations. A CRQC could break vulnerable public-key mechanisms used for certificates, signatures, and key exchange, potentially enabling impersonation, forged instructions, and malicious use of legacy protocol fallbacks while appearing legitimate.
Trust is therefore the first thing to fail.
Within the financial system, the most vulnerable components are interbank payment and settlement infrastructures, particularly real-time gross settlement (RTGS) systems such as Fedwire. Other highly exposed targets include SWIFT, CLS, CHIPS, major custodians, certificate authorities, and hardware security module vendors.
These systems are highly centralized because centralization creates efficiency. However, the same concentration creates critical single points of failure when trust mechanisms become vulnerable.
Importantly, similar to how Allied cryptanalysts secretly exploited the Enigma cipher during World War II, an actor owning a CRQC would likely seek to remain undetected for as long as possible. In that scenario, the financial architecture does not fail all at once. It becomes quietly compromised until discovery. Once compromise is discovered, uncertainty explodes. Organizations no longer know how long the adversary has been present, what data was accessed, or which transactions and signatures are legitimate. Trust evaporates, and trust is the operating system of the financial network.
Financial systems are highly interconnected. How could localized failures propagate into broader systemic disruption? Which dependencies or concentration points do you view as the most critical from a quantum risk perspective?
Propagation occurs through four primary channels: liquidity, confidence, operational dependency, and information.
The liquidity channel is the most direct and best studied. Research by the New York Federal Reserve has shown that when a core payment institution can receive payments but cannot remit them, counterparties experience immediate liquidity shortfalls4. These impaired institutions effectively become liquidity black holes.
The research suggests that impairment of one of the five largest institutions can affect between 31% and 38% of the network. Once a critical mass is reached, the broader system begins to fail. The impact is especially severe if the attacker has private information about the target institution or if the system is already under high-volume stress, such as at the end of a financial quarter or the end of the year.
Confidence is equally important. When institutions can no longer determine whether a payment, transaction, software update, or authentication signature is genuine, uncertainty spreads rapidly. This drives liquidity hoarding, fire sales, and a procyclical spiral, or self-reinforcing destabilizing behavior.
Quantum risk differs from many traditional cyber risks because uncertainty itself becomes contagious. Institutions begin questioning what is legitimate, who has been affected, and how far compromise has spread. Once confidence collapses, contagion spreads through both liquidity and information channels simultaneously.
On Post-Quantum Cryptography
Based on what you observe across the financial industry, is PQC migration on track for a ~2030/2035 horizon, or lagging? Where are the main bottlenecks?
The answer is not simply yes or no.
The publication of NIST’s standards in August 2024 represented a major milestone. However, implementation is proving much more difficult than standardization.
Financial institutions possess enormous volumes of long-shelf-life data that must be identified, classified, prioritized, and migrated. Estimates suggest that complete migration can take five to seven years even for smaller organizations, and potentially twelve to fifteen years for very large institutions.
That becomes particularly problematic when combined with the harvest-now-decrypt-later threat. If a large institution requires ten or more years to complete migration, and a CRQC may arrive within a similar timeframe, then organizations that have not already started protecting critical long-lived data are effectively behind schedule.
Several jurisdictions have made significant progress on post-quantum cryptography migration in the financial sector. The European Union6, Canada7, the United Kingdom8, Australia9, and Israel10 have all published guidance, roadmaps, or supervisory communications on post-quantum cryptography migration for financial institutions and critical financial infrastructures; Israel and Australia provide the clearest financial-sector-specific expectations, while the EU and UK set broader critical-infrastructure or cross-sector timelines.
The United States remains behind. While NIST standardized the cryptographic algorithms, there are currently no binding mandates requiring financial institutions to complete migration by a specific date. There is little urgency. Many executives are effectively waiting for stronger direction from the government before committing substantial resources.
The gap between available standards and actual implementation remains one of the central challenges facing the sector.
Which actors in the financial system are most exposed due to slow or incomplete PQC migration? How does this uneven readiness shape the quantum risk landscape?
Three categories stand out.
First are resource-constrained organizations, including many regional and smaller banks. These institutions often lack the staff, budget, and vendor leverage needed to execute complex migration programs.
Second are highly interconnected intermediaries such as payment and settlement infrastructures. Because of their central role in the network, compromise of these institutions can have disproportionate systemic consequences.
Third are major cloud and service providers. A successful quantum-enabled breach affecting a large provider could cascade across hundreds of connected institutions simultaneously.
The key issue is that quantum risk creates a classic weakest-link problem. A financial network is only as resilient as its least prepared participants. The largest institutions may invest heavily in migration, but their security still depends on the readiness of counterparties, vendors, and service providers.
There is also an important geographic dimension. The United States continues to operate without binding migration mandates, while other jurisdictions have moved further ahead. At the same time, many developing economies face even greater resource constraints.
These vulnerabilities increasingly overlap with broader geopolitical fault lines. Jurisdictions that lag in quantum readiness often overlap with those exploring alternatives to the dollar-dominated financial system. PQC migration is not causing that fragmentation, but it may reinforce existing trends.
Looking ahead
Which risks for the financial sector—either in the PQC transition or from quantum-enabled attacks—do you believe are underappreciated today?
The first is still the HNDL threat. Long-shelf-life data is vulnerable today, even if CRQCs do not yet exist.
The second is authentication risk. Much of the discussion focuses on HNDL, but the ability to forge signatures and impersonate trusted entities may ultimately be more destabilizing.
A third underappreciated risk is algorithmic concentration. Several central PQC standards rely on lattice-based approaches, and if future breakthroughs were to expose weaknesses in those assumptions, excessive reliance on a narrow set of cryptographic families could create systemic vulnerabilities. That is why institutions should pursue cryptographic agility rather than treating migration as a one-time exercise. The objective should be the ability to adapt quickly if future cryptographic assumptions change.
Finally, governance asymmetry receives too little attention. The United States currently has one of the weakest binding governance frameworks for PQC migration among major peer jurisdictions, despite operating the core infrastructure underpinning the global dollar system. That creates an important strategic vulnerability. The U.S. is asking others to trust the dollar-led financial infrastructure that it has not itself protected against a recognized threat.
By 2035, do you expect the financial system to converge toward a relatively stable post-quantum cryptography equilibrium, or toward persistent asymmetries?
If current trends continue, I expect persistent asymmetries rather than clean convergence.
The divergence between large, well-resourced institutions and smaller organizations is likely to remain. The weakest-link problem will continue to dominate. It only takes a small number of poorly protected institutions, vendors, or newly discovered vulnerabilities to create systemic exposure.
There will also be asymmetries between countries. Different jurisdictions are moving at different speeds and following different governance approaches.
Another important asymmetry may emerge around technical standards. No other country has deployed financial-sector quantum-secured communications at the same scale as China. Whether those systems ultimately prove superior remains uncertain, but the deployment gap is significant.
Quantum vulnerability therefore acts as an accelerant of existing geopolitical, technological, and cybersecurity trends. It does not create these dynamics, but it strengthens them.
Do you see agentic AI amplifying the threat when combined with future CRQCs—or helping mitigate it by accelerating PQC deployment?
I believe it will do both.
On the defensive side, agentic AI can accelerate migration programs, improve cybersecurity monitoring, and help organizations identify vulnerabilities more quickly than human analysts alone.
On the offensive side, it can help attackers discover zero-day vulnerabilities, sift through enormous quantities of harvested data, and identify high-value targets more efficiently. In that sense, the sophistication of future quantum attacks may already be increasing today.
Also, AI can shorten the path to a CRQC by accelerating quantum error correction research, algorithm development, and hardware progress. At the same time, it increases the value of harvested data and accelerates the processing and exploitation of information already collected.
Bottom-line: most risk frameworks still treat AI risk and quantum risk as independent variables. In reality, the two are increasingly coupled and should be analyzed together.
Interviewee
Alexander W. Butler is an independent national security policy analyst based in Arlington, Virginia. He previously served as Associate Director of the Quantum Alliance Initiative at Hudson Institute, where he led research on the economic and strategic impacts of quantum-enabled cyberattacks on U.S. critical infrastructure, including the financial system, the power grid, and cryptocurrency markets. He is the author of Prosperity at Risk: The Quantum Computing Threat to the U.S. Financial System, a 2023 report estimating the potential macroeconomic impact of a quantum-enabled attack on Fedwire. His work approaches quantum risk through an economic and national security lens, focusing on financial stability, systemic vulnerabilities, post-quantum cryptography governance, and U.S. strategic competitiveness.
References
1 Auer et al., “Quantum-readiness for the financial system: a roadmap,” BIS Papers, no. 158, Bank for International Settlements, Jul. 7, 2025. [Online]. Available: https://www.bis.org/publ/bppdf/bispap158.htm
2 JPMorgan Chase & Co., “JPMorgan Chase establishes quantum-secured crypto-agile network,” JPMorgan Chase Technology News, May 8, 2024. [Online]. Available: https://www.jpmorgan.com/technology/news/firm-establishes-quantum-secured-crypto-agile-network
3 Ghose et al., “Quantum Threat: The Trillion-Dollar Security Race Is On,” Citi Institute, Citigroup, 2026. [Online]. Available: https://www.citigroup.com/rcs/citigpa/storage/public/Citi_Institute_Quantum_Threat.pdf
4 T. M. Eisenbach, A. Kovner, and M. J. Lee, “Cyber Risk and the U.S. Financial System: A Pre-Mortem Analysis,” Federal Reserve Bank of New York Staff Reports, no. 909, Federal Reserve Bank of New York, Jan. 2020, rev. May 2021. [Online]. Available: https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr909.pdf
5 R. Campbell, “Enterprise Migration to Post-Quantum Cryptography: Timeline Analysis and Strategic Frameworks,” Computers, vol. 15, no. 1, art. no. 9, Dec. 24, 2025. doi: 10.3390/computers15010009. [Online]. Available: https://www.mdpi.com/2073-431X/15/1/9
6 M. Ivezic, “NIS2, DORA, and the EU Post-Quantum Roadmap,” PostQuantum.com, Jan. 6, 2026, updated Feb. 13, 2026. [Online]. Available: https://postquantum.com/quantum-policies/nis2-dora-pqc-quantum/; Regulation (EU) 2022/2554 (DORA), effective January 2025; NIS Cooperation Group, EU Coordinated PQC Roadmap, June 2025; European Commission COM(2026) 13, proposal to embed PQC requirement in NIS2. European Commission, Coordinated Implementation Roadmap.
7 Canadian Centre for Cyber Security, “Roadmap for the migration to post-quantum cryptography for the Government of Canada (ITSM.40.001),” Government of Canada, Jun. 24, 2025. [Online]. Available: https://www.cyber.gc.ca/en/guidance/roadmap-migration-post-quantum-cryptography-government-canada-itsm40001; Treasury Board of Canada Secretariat, “Migrating the Government of Canada to Post-Quantum Cryptography: Security Policy Implementation Notice,” Government of Canada, Oct. 9, 2025. [Online]. Available: https://www.canada.ca/en/government/system/digital-government/policies-standards/spin/migrating-government-canada-post-quantum-cryptography.html
8 National Cyber Security Centre, “Timelines for migration to post-quantum cryptography,” NCSC, Mar. 20, 2025. [Online]. Available: https://www.ncsc.gov.uk/guidance/pqc-migration-timelines
9 Australian Signals Directorate, “Planning for post-quantum cryptography,” Australian Cyber Security Centre, Sep. 22, 2025. [Online]. Available: https://www.cyber.gov.au/business-government/secure-design/planning-for-post-quantum-cryptography
10 Bank of Israel, Banking Supervision Department, “Banking System Preparedness for Cyber Risks Arising from Quantum Computing Capabilities,” Letter 202501, Jan. 7, 2025. [Online]. Available: https://www.boi.org.il/en/economic-roles/supervision-and-regulation/letters/letter202501en