Financial institutions world over have long relied on cryptographic techniques to secure transactions, protect customer data, and ensure regulatory compliance. Two pillars of this framework are tokenization and public-key infrastructure (PKI). These traditional approaches are threatened with the advent and potential of Quantum Computing that make it possible for advance algorithms to disrupt these traditional security mechanisms. This write up explores this emerging challenge and suggest some approaches for decision-makers in financial organizations to protect their organizations against this challenge.

The Foundation of Traditional Financial Security: Tokens, Certificates, and Encryption

Financial institutions world over have long relied on cryptographic techniques to secure transactions, protect customer data, and ensure regulatory compliance. Two pillars of this framework are tokenization and public-key infrastructure (PKI).

First, let’s take a quick look at these traditional technologies:

  • Tokenization: Replaces sensitive data (e.g., bank accounts, PANs) with non-sensitive tokens, minimizing exposure to breaches. For example, payment processors use tokens to secure credit card transactions, ensuring that even if intercepted, tokens cannot be reverse-engineered to reveal original data
  • PKI and Digital Certificates: Digital certificates (e.g., SSL/TLS) authenticate entities and encrypt data in transit. Asymmetric encryption algorithms like RSA and ECC underpin these systems, relying on computational hardness assumptions (e.g., factoring large primes) to prevent unauthorized access.

These mechanisms, when combined with regular vulnerability assessments, penetration testing, and compliance with international standards like ISO 27001 and NIST, have provided a robust defense against classical cyber threats, enabling secure digital banking, decentralized finance (DeFi) protocols, and cross-border transactions.

India’s financial sector too has embraced these technological revolutions in a big way, with platforms like UPI setting global records of adoption and value transactions.

Quantum Computing: Risks to Traditional Security Postures

Quantum computing introduces a paradigm shift in computational power. Quantum technology literally brings a ‘quantum leap’ to the computing powers enabling raw compute power for solving the kind of mathematical problems that traditional computers cannot. These limitations of the traditional computing were the implied assurance behind a range of traditional security technologies. The quantum computing thus threatens to dismantle these safeguards.

Some of the key risks of advance compute algorithms powered by quantum computing could pose include:

A. Breaking / Weakening Asymmetric Encryption

  • Shor’s Algorithm: Can factor large integers and compute discrete logarithms exponentially faster, rendering RSA and ECC obsolete. This jeopardizes PKI, digital signatures, and TLS-secured communications.
  • Grover’s Algorithm: Reduces the effective security of symmetric algorithms (e.g., AES-256) by halving key strength. This necessitates longer keys to maintain protection4.

B. Harvest Now, Decrypt Later (HNDL) Attacks:

Adversaries are already harvesting encrypted data, anticipating future decryption via quantum computers. Financial data—with long-term sensitivity—is a prime target.

C. Tokenization and DeFi Risks:

While tokenization itself isn’t directly quantum-vulnerable, the underlying cryptographic mechanisms are. Quantum attacks on underlying systems (e.g., blockchain consensus mechanisms or smart contracts) could expose tokenized asset flows, compromise smart contracts, and disrupt digital asset markets.

Indian Financial Sector Scenario and Regulatory Action

While digital transformation, tokenization, and robust encryption have underpinned the sector’s growth and resilience in India, the quantum computing based cybersecurity risk is very much real and applicable for Indian Financial Sector also.

Regulatory bodies have taken notice already, with the Securities and Exchange Board of India (SEBI) mandating quantum-safe infrastructure under its Cybersecurity and Cyber Resilience Framework (CSCRF). The urgency for Indian financial institutions to adapt is now a matter of regulatory compliance, operational continuity, and national trust.

SEBI’s CSCRF Mandate: Regulatory Compliance and Timelines

Recognizing the existential threat posed by quantum computing, SEBI has embedded quantum-safe requirements into its CSCRF. Key requirements of CSCRF include:

  • Mandatory Quantum-Safe Encryption: All SEBI-regulated entities must implement quantum-resistant cryptography, such as Post-Quantum Cryptography (PQC) and Quantum Key Distribution (QKD), to secure data both in transit and at rest.
  • Continuous Threat Monitoring: Security Operations Centers (SOCs) must be equipped for real-time incident detection and response, leveraging AI and machine learning to address advanced threats
  • Regular Audits and Incident Response: Entities are required to conduct periodic audits, vulnerability assessments, and red teaming exercises, with immediate reporting of incidents via SEBI’s portal
  • Deadlines: SEBI’s original timelines had already passed, but extension has been provided. SEBI extended the deadline for implementing the Cybersecurity and Cyber Resilience Framework (CSCRF) for most regulated entities (REs) to June 30, 2025. This extension applies to all REs except Market Infrastructure Institutions (MIIs), KYC Registration Agencies (KRAs), and Qualified Registrars to Issue and Share Transfer Agents (QRTAs).

Non-compliance risks regulatory penalties, reputational damage, and erosion of client trust. Early adoption not only ensures compliance but also positions organizations as leaders in cybersecurity resilience.

Mitigation Strategies for Leadership Team of Financial Sector Organizations

Strategic Plan of Actions for Leadership Team

To meet SEBI’s mandate and future-proof operations, leadership teams should consider the following high-impact steps:

  1. Comprehensive Cryptographic Asset Inventory and Risk Assessment
    • Action: Audit all systems—especially those handling long-lived sensitive data—to identify dependencies on vulnerable algorithms (RSA, ECC, SHA-256).
    • Outcome: Prioritize assets for quantum-safe migration, focusing on high-risk areas such as transaction processing, client data repositories, and regulatory filings5.
  2. Phased Adoption of Quantum-Safe Technologies
    • Pilot and Integrate PQC and QKD: Deploy PQC algorithms (e.g., CRYSTALS-Kyber, Falcon) for data at rest and in transit. Implement QKD for ultra-secure communication channels, particularly in interbank and stock exchange networks.
    • Hybrid Approach: Use a combination of quantum and classical cryptography to ensure backward compatibility and minimize operational disruption during transition.
    • Partner with Experts: Collaborate with solution providers like Fireblocks, QNu Labs, Quantum Xchange, IBM Quantum Safe that offer a range of solutions and approaches quantum-safe cybersecurity solutions tailored for the financial sector. Their platforms integrate seamlessly and provide ongoing compliance support.
  3. Build a Culture of Cyber Resilience and Continuous Improvement
    • Ongoing Training: Upskill IT and security teams on quantum-safe technologies and incident response protocols.
    • Regular Drills and Audits: Conduct routine VAPT, red teaming, and incident response exercises as mandated by SEBI, using the Cyber Capability Index (CCI) for self-assessment6.
    • Strategic Roadmap: Develop a phased implementation plan with clear milestones to ensure timely compliance with SEBI’s 2025 deadlines.

Conclusion

Quantum computing is no longer a distant threat or a theoretical concern —it is an imminent reality.
For Indian financial institutions, the transition to quantum-safe infrastructure is both a regulatory obligation and a strategic necessity. By acting decisively—auditing cryptographic assets, adopting PQC and QKD, and building a culture of resilience—SEBI-regulated entities can secure their operations, protect client trust, and lead India’s financial sector safely into the quantum era.

Key Takeaways for Leadership:

  • Act Now: HNDL attacks make pre-emptive action critical.
  • Collaborate: Engage with consortia like the Quantum Economic Development Consortium (QED-C) to align with industry best practices.
  • Invest in Agility: Modular, crypto-agile architectures will enable rapid adaptation as standards evolve.
    Compliance, resilience, and leadership will define the future of India’s financial security. Institutions that delay risk operational disruption, regulatory penalties, and loss of stakeholder trust.

Compliance, resilience, and leadership will define the future of India’s financial security. Institutions that delay risk operational disruption, regulatory penalties, and loss of stakeholder trust.