HSBC Advances FX Trading Protection with Quantum Keys

<p>HSBC has
completed what it claims is the world's first trial using quantum key
distribution (QKD) technology to protect highly sensitive financial data. The
trial aimed to safeguard the data against potential future cyber attacks
employing powerful quantum computers.</p><p>HSBC Completes Trial Using
Quantum Technology to Protect Financial Data</p><p>The British
bank utilized the QKD tool to secure a 30 million euro foreign exchange (FX)
trade on its proprietary trading platform using artificial intelligence (AI).
QKD uses quantum physics principles to distribute encryption keys securely
between parties. These quantum keys can then encrypt sensitive data
transmissions.</p><p>HSBC
collaborated on the project with UK telecom provider BT, Toshiba, and Amazon
Web Services. BT supplied the quantum network, Toshiba provided QKD devices,
and Amazon assisted with <a href="https://www.financemagnates.com/terms/c/cloud/">cloud</a> support.</p><p>"While
we take the view that we are some distance away from quantum computers being
able to break traditional encryption, the time to prepare for this is
now," Colin Bell, the CEO of HSBC Europe, told Reuters.</p><blockquote><p lang="en" dir="ltr">HSBC tests protecting FX trading from quantum computer attacks <a href="https://t.co/UTZ0qhtMbk">https://t.co/UTZ0qhtMbk</a> <a href="https://t.co/1qyK6UM3Qq">pic.twitter.com/1qyK6UM3Qq</a></p>— Reuters (@Reuters) <a href="https://twitter.com/Reuters/status/1732301450221371867?ref_src=twsrc%5Etfw">December 6, 2023</a></blockquote><p>According
to Andrew Shields at Toshiba, the successful trial marks an important
advancement demonstrating QKD's commercial viability on existing fiber optic
networks. HSBC plans to potentially integrate the AI-based platform into
certain trading systems to bolster FX data security.</p><p>The move
comes just a few weeks after the banking giant joined Broadridge's <a href="https://www.financemagnates.com/fintech/broadridge-welcomes-hsbc-to-newly-launched-distributed-ledger-repo-platform/" target="_blank" rel="follow">newly launched
distributed ledger repo platform</a>. </p><p>Quantum Computers' Threats
to FX Trading</p><p>Although
practical quantum computing attacks could still be years away, HSBC views QKD
as a prudent precaution against <a href="https://www.financemagnates.com/cryptocurrency/interview/quantum-computing-could-become-a-major-threat-to-blockchain-networks/" target="_blank" rel="follow">future cyber threats</a>. The technology currently
remains prohibitively expensive for many end users. Nonetheless, financial
institutions like HSBC aim to prepare their systems for the quantum computing
age.</p><p>The exponentially <a href="https://www.financemagnates.com/fintech/data/harnessing-quantum-computing-for-financial-analysis-and-risk-management/" target="_blank" rel="follow">greater processing capacity</a> of quantum computers could pose a significant threat, as it may empower criminals to
breach current encryption methods. This may enable them to steal confidential
financial data and access sensitive currency transactions on proprietary
platforms. The ability to decrypt once-secure data transmissions grants hackers
invaluable visibility into banks' trading strategies and positions.</p><p>Armed with
such insider information, malicious actors could manipulate <a href="https://www.financemagnates.com/terms/e/exchange/">exchange</a> rates
through targeted interventions. They may unfairly profit by exploiting their
exclusive access to data on upcoming trades. More advanced algorithms running
on quantum computers could also detect obscure arbitrage opportunities before
others. This provides additional ways for select players to destabilize FX
markets.</p><p>Furthermore,
the prohibitive costs of transitioning to <a href="https://www.financemagnates.com/fintech/data/can-quantum-computing-enhance-security-and-scalability-in-financial-transactions/" target="_blank" rel="follow">quantum-secure systems</a> may
concentrate power among large financial institutions. This could undermine fair
competition in currency trading by restricting smaller participants' access to
the latest quantum-resistant tools. On top of that, the investment required to shield critical
systems could also raise banks' infrastructure expenses.</p>

This article was written by Damian Chmiel at www.financemagnates.com.