Banks and Regulators Test Post-Quantum Digital Asset Transactions

The Responsible Fintech Institute (RFI) and Safeheron have launched a cross-regional pilot to evaluate post-quantum cryptography (PQC) in digital asset transactions. The initiative brings together commercial banks and financial regulators from multiple jurisdictions to test whether quantum-resistant cryptographic protocols can be integrated into digital asset infrastructure under realistic conditions. The pilot is designed to address the growing concern that future quantum computers could compromise widely used public-key cryptography, potentially exposing digital assets to new security risks.

Post-Quantum Protocols in Practice

The pilot centers on the implementation of the ML-DSA-65 digital signature algorithm, a module-lattice-based scheme standardized in NIST FIPS 204. Safeheron has developed a multi-party computation (MPC) protocol that integrates ML-DSA-65 for distributed key generation and transaction signing. The architecture uses a non-custodial 2-of-2 MPC setup, allowing each participating institution to retain control over its own key share. This approach is intended to eliminate single points of failure and to test whether distributed signing workflows can be maintained without compromising operational resilience.

To support transparency and independent verification, Safeheron plans to release the underlying PQC-MPC protocol as open-source software. The consortium will also publish a technical whitepaper detailing the protocol's design, interoperability across jurisdictions, and findings on operational robustness. The pilot is currently operating on the NEAR testnet, providing a controlled environment for transaction flow testing without exposing production assets to risk.

Regulatory Oversight and Multi-Jurisdiction Testing

Regulatory authorities from Asia and Europe are participating as observers in the first phase of the pilot, with plans to contribute to governance and supervisory policy in subsequent phases. The initiative is aligned with regional mandates such as the Monetary Authority of Singapore's technology risk directives, the Hong Kong Monetary Authority's Fintech 2030 Quantum Preparedness Index, and the Malta Financial Services Authority's ICT risk monitoring framework. By involving regulators early, the pilot aims to ensure that cryptographic migration strategies meet evolving supervisory expectations and cross-border compliance requirements.

Participants include RFI Chairman Chia Hock Lai, Safeheron Chief Security & Policy Officer Jag Foo, Bison Bank CEO António Henriques, and GFSO Managing Director David Peters. The pilot's governance structure is designed to facilitate input from both regulated financial institutions and supervisory bodies, with the goal of developing standards that can be adopted across multiple jurisdictions.

Technical Evidence and Remaining Challenges

While the pilot demonstrates the feasibility of integrating post-quantum digital signatures and distributed key management into a digital asset platform, several technical and operational questions remain. The ML-DSA-65 algorithm, as specified in NIST FIPS 204, is designed to resist attacks from large-scale quantum computers, but its real-world performance in high-throughput financial environments is still being evaluated. The pilot's use of the NEAR testnet allows for controlled measurement of transaction latency, signing throughput, and error rates, but results from this environment may not fully capture the complexity of production-scale deployment.

Open-source release of the protocol code is intended to enable independent security audits and to foster broader community scrutiny. However, the effectiveness of post-quantum migration will depend on the ability of financial institutions to coordinate upgrades across legacy systems, manage key distribution securely, and maintain compliance with evolving regulatory standards. As with other recent efforts to benchmark quantum-resilient cryptography, such as the AI-based quantum error correction decoder reported by Quantum X Labs (see coverage of AI-based quantum error correction benchmarks), the transition from laboratory demonstration to operational infrastructure remains a significant engineering challenge.

Open Questions and Next Steps

The pilot's next phase will focus on expanding regulatory participation and refining governance frameworks for cross-border digital asset transactions. Key open questions include the scalability of the MPC architecture, the interoperability of PQC protocols with existing financial infrastructure, and the operational impact of increased computational overhead associated with post-quantum algorithms. The consortium's whitepaper, expected later this year, will provide further technical detail and performance data from the pilot.

Independent replication and broader industry adoption will be necessary to validate the pilot's findings and to establish practical migration paths for digital asset platforms. The pilot's controlled environment provides a valuable testbed, but the ultimate test will be the secure and efficient integration of post-quantum cryptography into live financial systems operating at scale.

Post-quantum cryptography refers to cryptographic algorithms designed to remain secure against attacks by quantum computers. Unlike quantum key distribution, which uses quantum states to distribute secret keys, post-quantum algorithms run on conventional computers and are intended as drop-in replacements for current public-key systems. The security of these algorithms relies on mathematical problems believed to be hard for both classical and quantum computers, such as lattice-based constructions. Standardization efforts, including NIST's selection of algorithms like ML-DSA-65, aim to provide a foundation for migration, but real-world deployment requires careful engineering, interoperability testing, and ongoing evaluation as quantum hardware advances.