Imagine a world where investment strategies are optimized in real time and fraud is detected before it even occurs. That is the promise of quantum computing for the financial sector. Quantum technologies bring a mix of opportunities, risks and challenges — not only from a technical perspective but also for policymakers, especially regarding cybersecurity and the stability of financial markets.
New governance approaches are needed to mitigate risks while embracing the transformative potential of quantum computing.
Finance’s leap into the quantum unknown
When Nvidia CEO Jensen Huang declared in January that bringing “useful” quantum technology to market would take at least 15 to 30 years, stock markets immediately reacted, and quantum-related stocks of Nvidia’s competitors declined within 48 hours. Regardless of what motivated those comments in the first place (and while he later walked them back at Nvidia’s “Quantum Day” event in March), the immediate financial fallout is symptomatic of the volatility of the quantum computing market. It also illustrates how often irrational thinking and a lack of factual information drives the debate around quantum computing and the narratives surrounding it.
Actual breakthroughs in chip technology suggest a more nuanced reality. Google’s latest innovation, Willow, and Microsoft’s Majorana-based topological chip stand at the cutting edge — highlighting both the progress in hardware and the diversity of approaches that remain in play. Google’s system uses superconducting qubits, while Microsoft’s relies on ion-trapped technology. With no single solution yet dominating, one thing is clear: the race for the perfect qubit is on.
The financial sector has historically been an early adopter of transformative technologies, ranging from high-frequency trading powered by supercomputing to blockchain and artificial intelligence. Now, companies, banks and governments are turning their attention to the revolutionary potential of quantum computing. Industry leaders like IBM and Google predict that their systems will reach 1,000 logical qubits by 2033, potentially leading to the full integration of quantum capabilities into financial operations by 2035. Quantum computing could revolutionize critical decision-making and strategic planning by enabling faster and more accurate solutions to complex problems.
This offers a significant competitive advantage for those who can effectively harness its power in fields like financial modeling, supply chain optimization and simulation. Analysts predict quantum computing could generate up to $622 billion in value across sectors, unlocking unprecedented efficiencies and insights. However, quantum computing applications remain a high-risk, high-reward asset, requiring a cautious, strategic approach to both investment and implementation. Quantum hardware, software and hybrid solutions are still in the early stages of
development, making it difficult to predict their evolution.
Are we witnessing the beginning of a quantum revolution that will redefine computing and, by extension, the financial sector? Or will quantum technology remain confined to research labs, never fully realizing its potential? As quantum computing offers groundbreaking possibilities and limited realizations, policymakers worldwide must find ways to balance opportunities and risks. This demands sector-specific policies, adaptive strategies and an acute awareness of the disruptive influence of emerging players like big tech firms and quantum startups. The global focus on quantum policy is at an all-time high, with 2025 even declared the “Year of Quantum Science and Technologies” by the UN.
Faster trades, vulnerable encryption
Quantum algorithms could transform risk management and market simulation by enabling more precise modeling of fluctuations and optimizing investment strategies. For instance, Quantum Monte Carlo algorithms could improve risk assessment by providing more precise evaluations of financial derivatives, options, swaps, high-frequency trading models and overall portfolio optimization. They address the limitations of classical methods in modeling complex, correlated assets and volatile market conditions. Quantum Monte Carlo still lacks
implementation at scale, but current experiments on small datasets already show significant progress, hinting at a quantum advantage once computers become widely available at scale.
While regulators focus on security risks, financial institutions are exploring quantum computing’s optimization potential. Examples include JPMorgan’s and HSBC’s experiments in optimizing their risk exposure. Furthermore, fraud detection stands to gain from the exponential computing speed-up expected through quantum computers. For example, quantum-enhanced anomaly detection could identify suspicious transaction patterns in real time, reducing
false positives and improving the accuracy of fraud prevention in banking and credit card transactions.
within hours. The reason is that they are entirely relying on current computational systems that cannot factor prime numbers efficiently. At the moment, just four native quantum computing algorithms exist. One of them is Shor’s algorithm, which can efficiently perform the factorization of huge prime numbers. Our current encryption schemes rely on the fact that even supercomputers cannot do this efficiently. But the question is not if encryption breaks, but when and what computational benchmarks are required for this to happen.
While this might seem like a future problem, it already requires a transition to quantum-secure encryption. The principle known as “harvest now, decrypt later” refers to the practice of intercepting and storing encrypted data today, with the intention of decrypting it once quantum computers become powerful enough. This poses a serious risk to financial institutions, as vast amounts of sensitive data
— including banking transactions, customer records and proprietary trading strategies — could be compromised in the future.
All-in on innovation, or focused on security?
Just like the inevitability of encryption breaches, the future integration of quantum computing into the financial sector is no longer a question of if but when. While full-scale deployment remains years away, the foundations are already being laid, and first versions of the hardware are already available.
Policymakers around the world are focusing on two main dilemmas: First, how can they regulate quantum computing when its evolution is unpredictable and outpaces existing laws? Currently, we neither know the exact hardware configuration nor have a complete software stack to fully define quantum software. The main learning from Generative AI and the European AI Act is to avoid being in a reactive ex-post regulatory position in an exponentially growing market once an inflection point is reached. Second, how can they encourage innovation while safeguarding national security and financial stability? The stakes are high — countries that dominate quantum computing will not only gain economic and technological superiority but also control the future of secure communications, financial transactions and military capabilities. For instance,
China has already demonstrated quantum-secure satellite communications with the Micius satellite, raising concerns about geopolitical control over secure communications networks.
The European Centre for International Political Economy (ECIPE) developed a policy primer for quantum technologies that identified three key factors for successfully navigating the upcoming quantum era: establishing nterdependency as a strength instead of a weakness, cross-sectoral and public-private collaborations and a responsible and sustainable R&D strategy for developing quantum computing capacities.
‘The financial industry cannot afford to delay preparation until quantum computing reaches its full potential’
Quantum computing is an expensive and resource-intensive field requiring global cooperation. Without shared development, only a handful of financial institutions and countries will have access to quantum capabilities, creating a quantum divide where early adopters dominate markets. Creating interdependence can be a way to ensure a global balance between the different markets fostering financial stability. On the other hand, greater European self-reliance in quantum computing could also provide strategic advantages in the global technological race.
Public-private partnerships, specifically in the financial sector, will be necessary as quantum computing development requires expertise across hardware, algorithms, cybersecurity and financial modeling. No single institution can handle all aspects alone — governmental institutions, banks and other financial stakeholders in particular lack the expertise. The European Central Bank (ECB) and the Bank for International Settlements (BIS) are researching how quantum computing could impact central bank digital currencies (CBDCs). Public-private collaborations are essential to ensure financial stability as quantum applications grow.
Europe, America, China take different tacks
Using ECIPE’s benchmarks, we can observe significant differences in how major economies are approaching quantum computing in finance.
Within the European Union, only 37% of quantum collaborations occur between EU-based entities, raising concerns about internal interdependence. Many European quantum firms rely on hardware from China and the US. To reduce this reliance and foster internal collaboration, the EU introduced the $1 billion Quantum Technologies Flagship. This initiative aims to catalyze research and development across Europe, focusing on innovation and a competitive ecosystem. To mitigate cybersecurity risks, the funding supports quantum-secure finance applications, including Project Leap and the EU’s Quantum Communication Infrastructure (EuroQCI). Germany’s largest supercomputing center, the Leibniz Supercomputing Center, recently acquired quantum capabilities from European start-ups. In 2025, Europe will launch three “European Excellence Centers” to co-design quantum computing architectures and software alongside end-users, especially smaller and mid-sized firms.
Despite these efforts, overall EU investment in quantum computing still lags behind global leaders. The European Chips Act includes just $73 million in funding for quantum chip production, a small figure compared to the billions of dollars being spent by the US and China. The EU relies on anticipatory policies and soft law, along with hard regulations like the Cybersecurity Act and the NIS2 directive. The EU aims to harmonize its standards with the standards from the US
National Institute of Standards and Technology (NIST) . The Investment Screening Regulation seeks to prevent foreign investments that could compromise European security, while encouraging collaborative risk management.
In contrast, the US Outbound Investment Regulations are designed to limit foreign influence, especially from countries like China, that are seen as competitors in the quantum race. The regulation hinders investments outside the US in sensitive future relevant technologies — with a specific focus on China. This way, the United States intends to limit existing interdependencies as well as position themselves for future economic advantages. NIST has additionally approved three post-quantum cryptography standards in 2024 to ensure the security of financial systems as quantum computing matures. Beginning in 2025, the US will favor post-quantum encryption standards in sensitive sectors such as health and finance. While limiting investments from the outside, the US is considering legislation such as the proposed Department of Energy Quantum Leadership Act. Over the next five years, the legislation would invest $2.5 billion in quantum technologies, with a particular on strengthening the existing programs at five national agencies, while also fostering collaborations between government agencies and the private sector.
‘While the European Union seeks to foster internal collaboration and reduce reliance on external powers, the United States is taking more stringent measures to limit economic ties with foreign players, especially China’
China lies at the other end of the openness scale. The Chinese government has made substantial investments in quantum research, with the government actively supporting and funding quantum technology initiatives. However, 84% of China’s
collaborations happen domestically. Collaborations outside China only take place in a very targeted manner — China’s insular quantum strategy is driven by national plans like the “13th Five-Year Plan,” which prioritizes self-reliance and limits global collaboration. In 2025, China committed the equivalent of $15 billion — triple US
levels — and launched a $138 billion tech venture capital fund. While that kind of funding accelerates progress, it also risks longterm sustainability challenges due to limited transparency and reliance on open research being produced elsewhere, especially in the EU.
Europe and the US are increasingly united in their concerns over growing dependencies, particularly on China. Both aim to strengthen their ecosystems, but their strategies diverge. While the European Union seeks to foster internal collaboration and reduce reliance on external powers, the United States is taking more stringent measures to limit economic ties with foreign players, especially China. This growing focus on reducing interdependence is not without its risks, as both regions balance national security concerns with the need for global cooperation.
Quantum computing and encryption technologies, however, are inherently global. As such, regulatory frameworks that are isolated or divergent could pose significant challenges, undermining efforts to build secure and interoperable financial systems. This presents a fundamental risk: Even if China emerges as the dominant force in the quantum race, the lack of harmonious international standards and collaboration could fragment the global quantum ecosystem, impeding the development of universally accepted and secure technologies. The competitive drive for supremacy, while important, must be tempered with a recognition that collaboration, particularly in areas like quantum encryption, is essential for safeguarding the interconnected financial systems that transcend borders.
How policymakers should respond
As quantum computing matures, the financial industry will undergo major transformations. The development of generative artificial intelligence (GenAI) has shown that traditional regulation cannot keep pace with rapid technical development. In order to gain agility, governments must adopt anticipatory approaches and respond swiftly to unpredicted changes in technological trajectories. With financial stakeholders leading investment and tech companies
leading development, policymakers must act swiftly to create new cohesive, forward-thinking and flexible policies that foster innovation without compromising security.
The short-term priority is preventing financial instability due to encryption breaches. One way to approach this problem is to incentivize financial stakeholders to immediately transition to post-quantum secure encryption and to establish standards as soon as possible. For harmonizing these technologies, the European Union could orient itself to the NIST standards and introduce hybrid methods to ensure smooth and limited transition costs. Currently, the European ecosystem is highly fragmented: The agility of the European Quantum Flagship is limited and quantum policies are often implemented as part of broader policies for emerging technologies instead of being specifically tailored for the quantum sector. With a highly fragmented policy landscape, Europe is risking both
falling behind on tech development and being vulnerable on security.
In the medium term, establishing efficient risk monitoring systems is crucial, as the opportunities brought by quantum computing will also introduce risks to financial stability. One example is the possible impact of quantum-enhanced high-frequency trading on market volatility, which must be carefully examined. One concern is that quantum computing-based trading could place and then cancel thousands of orders in microseconds, creating false demand signals and manipulating asset prices faster than financial oversight mechanisms are able to detect the activities. To assess these risks and determine how real the danger is, we need to establish quantum risk monitoring alliances to track systemic threats before moving on to hard regulations aimed at stopping individual investors from destabilizing the whole market, with steps such as limiting the number of legal trades per second.
These risk monitoring systems need to be applied in order to develop guardrails. The limitations of current policies need to be overcome not just by widening the space of enforcement intensity, but marking zones of desirable behavior. Specifically within sensitive sectors, the transition to post-quantum security cannot be optional — but there are several measurements, encryption methods and course corrections suitable to successfully navigate the transition to a post-quantum financial era. The high degree of interdependence within Europe requires responsible and agile steering of such a development. This includes fostering new ways of collaboration between international financial bodies such as the BIS, the International Monetary Fund, the US Securities and Exchange Commission, and the ECB to create cohesive regulatory standards that prevent disparities in quantum finance regulations across different jurisdictions.
In the long term, the inclusion of the majority of the world in quantum computing development and policy creation is crucial to avoid data deserts, capital flight and global financial instability. The wider the technological gap, the greater the risk — not just regarding encryption breaches, but also undermining existing guidelines by using international regulatory loopholes. With growing application ranges, it will also be crucial to incentivize quantum talent development through specialized education programs and public-private R&D partnerships, as companies already lack the needed specialists and technical talent to transition into the quantum era — let alone to take part in the research effort and develop new assets without creating new talent pipelines.
The next decade will be decisive in determining whether quantum technology serves as a force for financial stability or a disruptor of unprecedented proportions. The financial industry cannot afford to delay preparation until quantum computing reaches its full potential — proactive preparation is key to harnessing the benefits of this revolutionary technology while mitigating its risks.
New forms of collaboration and new policy instruments will be crucial to ensure the stability of the financial sector.