The federal government is pursuing two policies that are on a collision course.

On one track, it is accelerating the development and commercialization of quantum computing. In June 2026, President Trump issued an executive order establishing a whole-of-government effort to “accelerate deployment and commercialization of quantum computing, sensing, and networking.” A companion order directed federal agencies to migrate their most important systems to post-quantum cryptography by the end of 2031.

On the other track, policymakers are rapidly integrating quantum-vulnerable blockchain infrastructure into the financial system. Last summer, Congress enacted the GENIUS Act, creating a federal regulatory framework for dollar-denominated stablecoins that operate on public blockchains. At the same time, banking regulators have approved or conditionally approved national trust bank charters for major crypto firms, while the SEC is enabling the migration of America’s capital markets onto blockchains. The Depository Trust Company is developing tokenized-securities services, the SEC has approved Nasdaq trading of securities in tokenized form, and Chairman Paul Atkins has repeatedly promoted regulated securities activity on public, permissionless blockchains.

My new working paper, The Quantum Clock Is Ticking: Financial Stability and the Regulation of Quantum-Vulnerable Digital Assets, examines the collision between those two policy trajectories. The paper argues that financial stability should govern the federal response to the quantum threat and that the government’s objective should be to contain the transmission of a failure on a quantum-vulnerable blockchain into the regulated financial sector.

How a Quantum Computer Could Steal Cryptocurrency

While the science behind quantum computing is highly technical, the threat to cryptocurrency is remarkably easy to understand.

The security of Bitcoin, Ethereum, and most other major blockchains rests on a mathematical asymmetry. A cryptocurrency account, or wallet, is controlled through a pair of mathematically related keys. The public key can be revealed to others. The private key is the secret that authorizes transfers. A conventional computer can easily derive the public key from the private key, but it cannot work backward from the public key to recover the private one.

A sufficiently capable quantum computer running Shor’s algorithm would collapse that asymmetry. An attacker could take a public key visible on the blockchain, calculate the corresponding private key, and use it to create a valid digital signature transferring the assets to an address the attacker controls. The blockchain would verify the signature in the ordinary way, as there is no mechanism for distinguishing the lawful owner from a thief who had mathematically reconstructed the same credential using a quantum computer. This is why blockchain systems offer far less recourse against a forged digital signature than conventional financial systems operated by intermediaries.

The attack could occur in two principal ways. If a public key is already exposed on the blockchain, an attacker could derive the corresponding private key at leisure and transfer the assets whenever desired. If the public key becomes visible only when the owner initiates a transaction, the attacker could monitor the network, derive the private key during the confirmation window, and broadcast a competing transaction that diverts the funds elsewhere. The first scenario presents the greatest long-term concern because millions of cryptocurrency worth hundreds of billions of dollars are already associated with exposed public keys, including a large stock of dormant coins. Active owners may eventually migrate their assets to quantum-resistant addresses, but assets belonging to people who have died, lost their keys, or otherwise disappeared cannot migrate themselves. Unless the underlying blockchain changes how those assets are treated, they may eventually become available to whoever first possesses a sufficiently capable quantum computer.

What Changed in 2026

The quantum threat to public-key cryptography has been understood for decades. The practical question has always been the size and sophistication of the machine required to carry out the attack.

In March 2026, researchers from Google Quantum AI, Stanford, Berkeley, and the Ethereum Foundation published new resource estimates for breaking the elliptic-curve cryptography used by Bitcoin and Ethereum. Under the paper’s reference assumptions, the computation could be completed in minutes using fewer than half a million physical qubits – nearly a twenty-fold reduction from prior estimates. Because the authors believed publishing the underlying circuits would be irresponsible, they instead released a zero-knowledge proof that allowed outsiders to verify their claims without learning the attack design.

The secrecy bought sixty days. In June, André Schrottenloher, a French cryptographer working without access to Google’s circuits, published an independent reconstruction that achieved similar results. A separate team from the quantum computing company Oratomic concluded that Shor’s algorithm could reach cryptographically relevant scale with as few as 10,000 reconfigurable atomic qubits, although that architecture would require days rather than minutes to complete the relevant calculation.

No cryptographically relevant quantum computer exists today, and substantial engineering obstacles remain. But, as Coinbase recently put it, “[a] large-scale quantum computer capable of breaking current cryptography will eventually be built.” The challenge is that migrating a decentralized blockchain is far more difficult than upgrading a conventional computer system. Unlike a bank or government agency, no one can simply order Bitcoin or Ethereum to adopt new cryptography. Any transition requires coordination among developers, miners or validators, exchanges, custodians, wallet providers, stablecoin issuers, application developers, and millions of users, many with different incentives and no common authority. This leaves financial policymakers comparing two uncertain periods: the time remaining before a sufficiently capable quantum computer plausibly arrives and the time required to migrate decentralized networks and all the applications and institutions that depend on them.

Market expectations compress that timetable further. If investors value digital assets on the assumption that the quantum threat remains decades away, credible evidence that a capable machine is much closer will trigger an immediate repricing. The sudden revision in expectations may itself produce the first financial shock.

Why This Is Becoming a Financial-Stability Problem

A quantum attack on cryptocurrency would once have been largely confined to crypto markets. That quarantine has steadily eroded as policymakers have integrated blockchain infrastructure into the regulated financial system. Federally regulated stablecoins now connect public blockchains to bank deposits, Treasury securities, and the payment system. Exchange-traded products have brought digital assets into ordinary brokerage and retirement accounts, while custodians and federally chartered trust companies hold them on behalf of customers. At the same time, the Depository Trust Company, Nasdaq, and other market institutions are building tokenized trading and settlement systems. Together, these developments have created channels through which a loss of confidence in blockchain security could spread beyond crypto markets and into the broader financial system.

The threat also extends far beyond the theft of coins from individual wallets. Modern blockchain ecosystems depend on a wide range of cryptographic keys that control critical financial infrastructure. Stablecoins and tokenized assets rely on administrative keys that authorize designated parties to mint, burn, freeze, transfer, or reissue tokens. Bridges use cryptography to control assets moving between blockchains, while price oracles provide the data on which automated lending and other decentralized financial applications depend. Custodians likewise rely on cryptographic keys to secure customer wallets, deposit addresses, withdrawal controls, proof-of-reserves systems, validator operations, and internal authentication. As the Google researchers observe, these administrative keys may be even more attractive targets than individual wallets because compromising a single key can provide control over a much larger pool of assets.

A credible quantum breakthrough could therefore trigger a self-reinforcing crisis across the digital asset ecosystem. Custodians and exchanges could suspend withdrawals to prevent the theft of customer assets. Stablecoin holders could lose confidence in the security of issuer minting and bridge keys. Tokenized markets could halt transfers while participants determined which ownership records remained authoritative. Falling asset values could trigger margin calls, forced liquidations, and fire sales. Regulated investment products holding digital assets could transmit those losses into traditional investment portfolios.

From a financial stability perspective, the central concern is not the monetary loss of any particular cryptocurrency but the transmission of those disruptions into the broader financial system. The objective is to insulate the payment system, capital markets, banks, custodians, and systemically important financial market infrastructures from the runs, collateral impairment, settlement failures, forced liquidations, and institutional losses that could follow the collapse of a quantum-vulnerable blockchain network.

Federal Systems Get Deadlines; Crypto Markets Get Encouragement

The federal government’s treatment of its own systems demonstrates that it already understands the nature of the quantum threat.

The June 2026 Executive Order on advanced cryptographic attacks requires federal agencies to inventory high-value and high-impact systems, designate officials responsible for migration, submit implementation plans, and complete specified phases of post-quantum migration by 2030 and 2031. The G7 Cyber Expert Group’s roadmap for the financial sector, co-chaired by the U.S. Treasury, similarly emphasizes comprehensive inventories, migration planning, testing, coordination, and implementation over a multiyear transition.

Yet the federal government’s approach to digital assets bears little resemblance to the standards it applies to its own systems. The President’s Working Group on Digital Asset Markets acknowledges that a sufficiently capable quantum computer could derive users’ private keys and enable widespread theft. Its entire policy response, however, is a single sentence encouraging private actors to implement post-quantum cryptography “where practical.”

The latest Senate draft of the CLARITY Act likewise recognizes that advances in quantum computing threaten existing cryptographic standards and the security of digital assets. Rather than establish mandatory planning or migration requirements, however, it directs the ecosystem to address coordination challenges “not through regulation, but through voluntary, market-driven measures.” The bill instructs the National Institute of Standards and Technology to provide guidance, technical assistance, industry consultation, and periodic reports, but it imposes no migration deadline, no planning obligation, and no supervisory standard on the federally regulated institutions it would authorize.

The contrast is striking. When federal systems are at risk, policymakers require inventories, planning, accountability, and deadlines. When the same quantum threat endangers markets that Congress is simultaneously encouraging to move further into the regulated financial system, policymakers largely rely on voluntary action. Resolving that inconsistency is the central objective of my paper.

Why the Industry Cannot Solve This Problem Alone

To be clear, the crypto industry is not ignoring the quantum threat. Several major firms have begun serious preparations. Coinbase recently announced a company-wide post-quantum program that includes an inventory of its cryptographic dependencies and the development of post-quantum key-management infrastructure. Crypto custodian BitGo has introduced wallet-level quantum-risk controls designed to identify exposed addresses and reduce further public-key exposure. Anchorage Digital, ARK Invest, BlackRock, Block, Blockstream, Coinbase, Fidelity Digital Assets, Galaxy, and Strategy have formed the Bitcoin Security Consortium, pledging an aggregate $15 million over three years to support Bitcoin security research, including post-quantum preparedness.

These initiatives are encouraging, but they also illustrate why voluntary coordination has limits. Coinbase can upgrade the systems it controls. BitGo can improve wallet management. A consortium can fund research and raise awareness. None of these actors, however, can require Bitcoin’s globally distributed community of developers, miners, exchanges, custodians, and users to adopt a common technical solution on a common timetable. Indeed, the Consortium’s own founding statement emphasizes that it neither develops nor directs Bitcoin’s protocol and that each member retains complete discretion over its financial commitments.

The industry’s response is also shaped by incentives that discourage a more candid public discussion of quantum risk.

First, the industry has a confidence problem it cannot afford to aggravate. According to Pew Research Center, nearly two-thirds of Americans have little or no confidence that cryptocurrency is reliable and safe. Telling prospective users that the assets they purchase today could one day become vulnerable to quantum theft is unlikely to accelerate adoption.

Second, the industry has powerful legislative incentives to keep the issue in the background. Congress is actively considering market-structure legislation that would provide the federal regulatory framework the industry has sought for years. A broader public debate about quantum vulnerability naturally raises an uncomfortable question: should exchanges, custodians, stablecoin issuers, and other federally regulated intermediaries be required to demonstrate quantum readiness before receiving those new privileges? The industry has every incentive to preserve control over both the timing and the terms of that conversation.

Third, a successful migration would require precisely the kind of centralized coordination that the industry has long insisted does not exist. Foundations publish roadmaps. Core developers design upgrades. Exchanges convene working groups. Custodians and asset managers finance research. These efforts are both necessary and commendable. But they also reveal that identifiable institutions – and identifiable people – exercise significant influence over the security and evolution of supposedly decentralized networks. When decentralization serves as a legal defense, competent crisis management becomes an awkward reality.

The disparity in institutional priorities reinforces the point. Political advocacy and technical research serve different purposes, but the contrast is nevertheless striking. In January 2026, the crypto super PAC Fairshake reported $193 million on hand. A single $25 million contribution from Coinbase exceeded the Bitcoin Security Consortium’s entire three-year funding commitment. The industry has devoted substantially greater resources to shaping its regulatory environment than to coordinating a common quantum-security strategy.

A Federal Quantum-Resilience Perimeter

The paper proposes a federal quantum-resilience perimeter for digital assets. After a defined transition period, banks, trust companies, exchanges, custodians, stablecoin issuers, investment funds, clearing agencies, derivatives intermediaries, and other regulated entities would conduct covered digital-asset activities only through networks and arrangements certified by the federal government as quantum-resilient.

Qualification would require far more than replacing a single digital signature algorithm. Regulators would evaluate the security of the underlying blockchain, the applications built upon it, and the intermediaries connecting it to customers and regulated markets. A qualifying network would need to secure transaction authorization, consensus, governance, data availability, and other material cryptographic functions. Stablecoins, bridges, tokenized securities, Layer 2 systems, and custody arrangements would likewise need to demonstrate that their administrative keys, recovery mechanisms, ownership records, and dependencies are themselves quantum-resilient.

Qualification would also require a credible plan for legacy assets secured by cryptography that is no longer safe. Protocol communities would remain free to determine the technical solution best suited to their architecture – migration, quarantine, proof-based recovery, rate limits, issuer-led reissuance, permanent unspendability, or another approach – but they could not simply ignore the problem.

The transition should proceed in phases. Initial requirements would focus on cryptographic inventories, migration planning, stress testing, protection of the highest-risk keys, and clear policies governing forks and customer assets. Regulators could then restrict new exposure to networks lacking credible migration plans before, ultimately, limiting regulated custody, stablecoins, investment products, collateral, derivatives, tokenized securities, and access to U.S.-regulated dollar payment channels to qualifying networks.

Importantly, the proposal regulates regulated finance, not blockchain protocols themselves. Individuals would remain free to own legacy-chain assets, maintain self-custody, operate nodes, mine or validate transactions, publish software, conduct research, and transact peer-to-peer. The consequence of failing to qualify would not be prohibition of the underlying network, but exclusion from federally supervised financial channels.

That distinction is central to both the policy and the law. Rather than attempting to dictate the design of decentralized protocols, the proposal relies on Congress’s longstanding authority to establish the conditions under which federally regulated financial institutions may conduct business. Framing the regime as a condition of participation in regulated finance also avoids many of the more difficult constitutional and legal questions that would accompany a direct mandate requiring decentralized networks to adopt particular software or governance arrangements. As the paper discusses in greater detail, any durable solution must also account for the complex property, customer-entitlement, due process, and administrative law issues that arise when quantum-vulnerable assets can no longer be safely trusted.

An Invitation for Feedback

This is a working paper, and my goal in posting it now is to start a broader conversation about the financial stability implications of quantum computing. To date, most of the discussion has understandably focused on the technical challenge of migrating blockchain networks to post-quantum cryptography. Far less attention has been paid to the policy, legal, and regulatory questions that migration will inevitably raise as digital assets become more deeply integrated into the regulated financial system. My hope is that this paper helps begin that conversation. I welcome comments, criticism, and suggestions for improving the draft.

There will undoubtedly be disagreement about the optimal policy response. But the legal, regulatory, and financial stability questions raised by quantum computing deserve as much attention as the technical migration itself. My hope is that this paper broadens that conversation. The quantum clock is running. Financial regulators should begin keeping time.

 

Read the full paper here and send your thoughts to lee.reiners@duke.edu

 

Lee Reiners is a lecturing fellow at Duke University