Hong Kong warns banks of quantum risk as tokenization grows

The Hong Kong Monetary Authority published a white paper and the sector’s first Quantum Preparedness Index on Monday, giving banks an overall readiness score of 2.3 out of 10. The regulator urged banks to start post-quantum migration planning and set a sector target score of 10 by 2030.

The index found roughly half of surveyed institutions have no formal plan for migrating to post-quantum cryptography. The HKMA recommended banks catalogue cryptographic assets, identify systems that use vulnerable algorithms, assess migration complexity and prioritise upgrades for systems with the highest business impact.

The white paper describes the technical risk: quantum computers that can run algorithms like Shor’s algorithm could break common public-key methods such as RSA and elliptic-curve cryptography. That would allow attackers to decrypt protected data or forge digital signatures used to authorise transactions and verify identities, affecting distributed-ledger applications and payment networks.

Hong Kong has expanded tokenization under its Fintech 2030 strategy launched in 2025. Government figures cited in the paper show three batches of tokenized green bonds totaling about HK$16.8 billion have been issued since 2023. The HKMA is also advancing Project Ensemble to support tokenized deposits and digital-asset settlement and plans to examine tokenized Exchange Fund papers.

Financial Secretary Paul Chan reported in a Feb. 11, 2026 speech that banks in Hong Kong held more than HK$14 billion in digital assets under custody at the end of 2025, up about 180% year over year, and that tokenized deposits reached HK$29 billion. The regulator used those figures to illustrate the growth of on-ledger activity that depends on current cryptographic protections.

The white paper cited early experiments by banks. One surveyed institution completed a proof of concept applying post-quantum cryptography to distributed-ledger connectivity. The paper also notes a 2024 example in which a major bank used quantum-safe technology to move tokenized gold across distributed ledgers.

The HKMA recommended industry coordination on standards and transition timelines because migration will involve hardware and software changes across connected networks. The paper suggested testing post-quantum solutions in real-world environments, including pilot projects for tokenized asset flows and cross-ledger settlement.

The QPI and the white paper form part of the HKMA’s effort to integrate blockchain-based settlement and tokenization into Hong Kong’s financial infrastructure while addressing potential technical risks. The regulator emphasised that replacing embedded cryptographic systems can take years and advised early planning and industry-wide testing.