HSBC Holdings plc (NYSE: HSBC), in collaboration with quantum-computing pioneer, Quantinuum, has embarked on a pioneering venture to safeguard its digital gold assets against future quantum computing threats.
Announced on Thursday, the collaboration is focused on developing and testing quantum-safe cryptography (QSC) for HSBC’s digital gold tokens.
This partnership represents a strategic move by HSBC to future-proof its digital asset offerings. By integrating quantum-safe technologies, HSBC is protecting its assets and also setting a precedent for how financial institutions might adapt to quantum computing’s challenges.
It accomplishes this by demonstrating the protection of digital assets and prevents “store now, decrypt later” (SNDL) cyber incidents by using Quantinuum’s Quantum Origin randomness technology. SNDL is a cyber technique that steals sensitive data now and stores it for future decryption with powerful quantum computers.
This builds on HSBC’s innovation from last year when they became the first global bank to offer tokenised physical gold to institutional investors using distributed ledger technology (DLT). This year, HSBC launched another first by introducing the HSBC Gold Token for retail investors in Hong Kong. This token allows investors to acquire fractional ownership of physical gold.
HSBC also tested the interoperability of its gold tokens by using post-quantum cryptography (PQC) to safely move digital assets across distributed ledgers via secure networks. This included the capability to convert HSBC’s gold tokens into ERC-20 fungible tokens. These are tokens built on the Ethereum blockchain that follow a standard involving guidelines for creating and managing tokens. “Fungible” means each coin or token is identical and interchangeable with another of the same type, like currency.
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The bank signed a multiple year deal with IBM for quantum tech
In December, HSBC piloted quantum key encryption to safeguard client FX trading data from increasingly powerful cyber threats. In July, it became the first bank to join BT and Toshiba’s quantum-secured metro network, connecting two UK sites with Quantum Key Distribution (QKD) to strengthen its global operations against future cyber risks.
The bank also signed a multi-year deal with IBM to explore quantum technology. It’s also actively recruiting research scientists to build a dedicated capability within its innovation team. More recently, HSBC partnered with PayPal (NASDAQ: PYPL) and other members of the Emerging Payments Association Asia to explore the adoption of quantum-safe cryptography in the payments industry.
HSBC’s collaboration with Quantinuum on anti-SNDL technology for digital gold is important because it allows institutions to safeguard assets against future quantum computing threats.
The bank is proactively protecting its digital assets from being decrypted by powerful quantum computers in the future by implementing quantum-safe technologies like PQC and quantum random number generation (QRNG).
This partnership positions HSBC as a leader in financial security innovation, particularly as tokenized gold becomes a valuable asset class.
In addition to enhancing its own operations, HSBC’s quantum-safe technologies contribute to the broader security ecosystem, promoting adoption across various platforms and institutions. The bank’s early adoption aligns with evolving regulatory requirements, positioning it ahead of compliance demands while enhancing its market reputation.
By securing long-term data protection and reducing reliance on third-party cryptographic solutions, HSBC strengthens its technological sovereignty.
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Quantum safe tech could spearhead adoption of tokenization
Quantum-safe technology integration into digital gold is set to impact the gold industry, particularly mining. As tokenized gold gains popularity, it will likely drive up demand for physical gold. This could lead to mining companies increasing exploration and production.
Meanwhile, blockchain-based quantum-safe technologies will also enhance transparency across the gold supply chain by improving the traceability of gold from the mine to the consumer, reducing fraud and encouraging responsible sourcing practices.
The adoption of tokenized gold could expand the market by attracting tech-savvy investors and institutions interested in future-proof digital assets. According to a 2020 report from the World Economic Forum, companies like Calibre Mining Corp (TSE: CXB) (OTCMKTS: CXBMF) that focus on growth and sustainability, may benefit from this trend.
Additionally, the increased liquidity of digital gold could affect pricing dynamics, potentially introducing new volatility or stabilization between physical and digital markets. Mining companies will need to adjust their strategies to navigate these changes. Mining firms and tech companies could form partnerships as they integrate blockchain and quantum-safe technologies into their operations.
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