HSBC pilots quantum-safe technology to secure tokenised gold

HSBC has completed a pilot using quantum-safe cryptography to secure transactions of tokenised physical gold, marking the first time a global bank has applied post-quantum cryptography (PQC) to digital asset trading. The trial, in partnership with quantum computing firm Quantinuum, aims to protect digital assets from potential future vulnerabilities posed by quantum computing.

The pilot builds on HSBC’s ongoing efforts in the tokenisation space. In 2022, the bank launched tokenised gold for institutional investors, using distributed ledger technology (DLT) via its HSBC Orion platform. This year, it expanded the service to retail investors in Hong Kong, offering fractional ownership of physical gold. The latest development enhances the security of these digital assets, addressing concerns around the emerging capabilities of quantum computers.

“HSBC was the first international bank to offer tokenised physical gold and is now building on that innovation with cutting-edge cybersecurity protection for the future,” said Philip Intallura, Global Head of Quantum Technologies at HSBC. “This pilot successfully demonstrated the viability of deploying these advanced technologies in a real-world business environment.”

Quantum security and the SNDL threat

Quantum computing, while still under development, is expected to pose a significant challenge to existing encryption standards. Current cryptographic techniques, widely used across the financial sector, may be rendered obsolete by the computing power of quantum machines. One of the key risks is the so-called “store now, decrypt later” (SNDL) technique, where encrypted data can be stolen now and decrypted in the future as quantum technology advances.

To counter this risk, HSBC worked with Quantinuum to integrate its Quantum Origin randomness technology, employing PQC to secure its tokenised gold transactions. The trial also tested the interoperability of HSBC’s gold tokens across various platforms, including converting them into ERC-20 fungible tokens—a common standard for Ethereum-based digital assets. This interoperability is designed to improve the distribution of tokenised assets across different ledgers and digital wallets.

Ilyas Khan, Founder and Chief Product Officer at Quantinuum, commented on the trial’s significance. “As long-time partners in exploring commercial quantum applications, HSBC and Quantinuum are together building the next generation of financial services featuring quantum-hardened defences, harnessing the power of today’s quantum computers to safeguard sensitive data now and into the future.”

Preparing for the quantum era

HSBC’s quantum-safe pilot is part of a wider effort to future-proof its operations against the potential rise of quantum computing. Earlier this year, the bank joined BT and Toshiba’s quantum-secured metro network in the UK, which uses Quantum Key Distribution (QKD) technology to protect its communications. HSBC is also working with IBM and industry partners to explore broader applications of quantum-safe cryptography across its business.

While large-scale quantum computers may be several years away, the pilot underscores HSBC’s proactive approach in addressing cybersecurity risks that could impact the financial sector. As other financial institutions consider the implications of quantum computing, HSBC’s trial may serve as a template for how banks can begin preparing for the eventual challenges posed by this next-generation technology.

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