Bitcoin and Banking Encryption Systems Face Quantum Threat? Moody's Warns of Potential $3 Trillion Loss

Quantum computing and cryptocurrencies have long been viewed as speculative emerging fields, despite their expanding real-world applications. Yet, they have not fully entered the mainstream. Now, these two previously independent technologies are on a collision course—one that could redefine the security foundation of the Bitcoin network.

According to The Barron's, in 2023, BlackRock (BLK-US), the world's largest asset manager, issued a warning in its securities filings: once quantum computing matures, it could threaten the cryptographic security of the Bitcoin network.

This warning is no longer mere speculation. Analysis shows that the core threat lies in 'Shor's algorithm,' a computational method capable of rapidly factoring large integers.

As early as 2001, an IBM (IBM-US) research team successfully used a primitive quantum computer to factor the number 15 into 5 × 3, proving the algorithm's feasibility.

However, Shor's algorithm has only been executed around a dozen times in laboratory settings, handling extremely small numbers, and remains firmly in the research phase.

Nonetheless, the industry widely believes that as more powerful quantum machines emerge, the impact will extend beyond blockchain networks—banking and asset custody systems relying on encryption will also be vulnerable.

Moody's (MCO-US), the credit rating agency, estimated in a May report that quantum attacks on payment systems could result in indirect losses of $2 trillion to $3 trillion.

Moody's stated in the report: 'As digital financial markets attract more institutional investors, cyber risks associated with blockchain platforms have evolved from peripheral risks to mainstream risks.'

In response to this looming threat, financial institutions have already taken action. BlackRock, Ark Invest, and Fidelity recently joined forces to establish the 'Bitcoin Security Consortium,' pledging $15 million over the next three years to enhance the long-term resilience of the Bitcoin network.

Beyond traditional financial firms, cryptocurrency exchange Coinbase (COIN-US), software company MicroStrategy (MSTR-US)—a major Bitcoin holder—and cryptocurrency platform and data center operator Galaxy Digital (GLXY-US) are founding members of this initiative.

As the publicly traded company holding the largest Bitcoin position globally, MicroStrategy CEO Phong Le said funding research and participating in discussions is a natural step to protect the core assets on the company's balance sheet.

Galaxy Digital is taking additional steps beyond the consortium. Earlier this week, the company announced its own 'Bitcoin Quantum Readiness Initiative,' planning to offer up to $5 million in grant funding to developers working on post-quantum Bitcoin solutions.

The company has also established a 'Quantum Advisory Committee' to guide the initiative's research direction and evaluate grant applications. The three founding members are researchers and professors from universities in the United States and Canada.

While this threat may still be years away, the milestone is drawing closer. Shor's algorithm requires a fault-tolerant quantum computer with built-in error correction—far more reliable than today's noisy machines.

For example, IBM aims to launch large-scale, fault-tolerant quantum computers by 2029, meaning institutions have only a few years, not decades, to prepare.

However, the threat may not unfold as expected. Since most people will never have access to quantum computers, widespread criminal abuse is not the primary concern.

Yet, as governments worldwide invest heavily in their own quantum programs, the risk to national security becomes increasingly real.

Last month, U.S. President Donald Trump signed two executive orders related to quantum computing. One mandates that federal systems transition to post-quantum cryptographic technologies by 2031. These algorithms are designed to withstand attacks from both classical and quantum computing systems.

Clearly, the threat extends far beyond Bitcoin. Defending against a crisis still taking shape, with an unclear outline, is undoubtedly a daunting task—but every step forward now buys crucial time for future preparedness.