SEC Faces Pressure to Address Quantum Threats to Digital Assets

Experts Warn of Q-Day as Bitcoin and Ethereum Encryption at Risk

A submission to the Securities and Exchange Commission’s Crypto Assets Task Force has urged regulators to prepare for the looming threat of quantum computing, warning that trillions of dollars in digital assets could be exposed if existing cryptographic protections collapse. The proposal, titled the Post-Quantum Financial Infrastructure Framework and authored by Daniel Bruno Corvelo Costa, calls for an urgent transition to quantum-resistant standards and highlights the growing danger posed by adversaries engaged in “Harvest Now, Decrypt Later” strategies, where encrypted data is collected today in anticipation of future breakthroughs.

The framework recommends immediate safeguards, including automated vulnerability assessments, prioritization of high-risk institutional wallets and exchanges, and a phased migration strategy combining classical and post-quantum cryptographic standards. It anchors its approach in the standards finalized by NIST in 2024, particularly FIPS 203–205, with the HQC algorithm proposed as a fallback. The submission explicitly warns of “Q-Day,” the moment when quantum machines can crack Bitcoin’s encryption, a scenario experts estimate could arrive by 2028. The report states, “Establishing a quantum-resilient digital asset ecosystem is needed to secure investor assets and ensure the long-term integrity of U.S. capital markets.”

Developers have already begun responding to these risks. A Bitcoin Improvement Proposal introduced in July outlines a phased approach to transitioning the network’s signature scheme to quantum-resistant alternatives. The plan would block transactions to legacy addresses and, after roughly five years, freeze coins still held in outdated formats, effectively rendering them unspendable. David Carvalho, CEO of Naoris Protocol, has warned that quantum computing poses the most serious threat to Bitcoin’s security yet and could break its cryptographic protections within five years or less, echoing the urgency behind the regulatory submission.

Vitalik Buterin has added further weight to these concerns, stating just six days ago that there is a 20% chance quantum computers could break modern cryptography by the end of 2030. His careful wording suggested cautious realism, noting the risk is not guaranteed but significant enough to warrant immediate attention. 

The combination of these warnings from both the technical and policy fronts underscores a critical juncture for digital assets. Without swift adoption of quantum-resistant standards, the core infrastructure supporting Bitcoin, Ethereum, and the broader market—including elements tracked by every crypto price index and tied to overall coin market cap valuations—could be undermined within the decade, exposing the entire crypto price ecosystem to systemic vulnerability.

This article has been refined and enhanced by ChatGPT.