A study from the Federal Reserve has looked into the impact of quantum computing. One finding is that it may impact the security of Bitcoin and cryptocurrencies.
The US Federal Reserve has conducted a study into the impact of quantum computing. It found that these devices, currently in production and at the later stages of research, will have the possibility to decrypt historical transactions on the blockchain. The result would be that this would expose private data, and that current encryption standards may not be enough. This does not just extend to Bitcoin, but also to other blockchain networks.
The Appeal of Bitcoin
Bitcoin has recently had a record run, hitting new highs of $126,069 as of October 6th. While it has retraced a little to $122,534 by October 8th, it is back on an upward trend. Other crypto prices today, in early October 2025, have followed suit. Ethereum was back to $4485, testing its all-time high of $4,946. With positive sentiment behind it due to the forthcoming Fusaka upgrade, it is quite likely that it will breach this before the rollout in early December.
All of these cryptocurrencies work through storage on a distributed ledger. Their entire history, including transactions, is transparent and open to view. This means the cryptographic methods used to store them will be easy to crack with quantum computers.
None of this seems to be denting confidence in cryptocurrencies, which are increasingly being viewed as a safe-haven asset akin to gold. Binance noted that amidst economic uncertainty like the US shutdown, the total crypto market cap recovered to over US$4T, with Bitcoin and Ethereum both rising about 4–5% and outperforming traditional equities. It highlighted how the shutdown has suspended key U.S. data releases, including the Nonfarm Payrolls report. Private payrolls already showed a loss of 32,000 jobs in September, the largest drop since 2023, raising concerns over labor market health and U.S. creditworthiness if the shutdown extends. Yet none of this impacted the prices of cryptocurrencies.
The Impact of Quantum Computers
Titled “Harvest Now, Decrypt Later,” the report says that attacks of this nature are an active threat. Criminals are currently taking data that was once thought secure and storing it until a time when quantum computers become powerful enough to unlock it. It also highlights how this means the threat is not distant, but is currently taking place.
Quantum computers use quantum bits, known as qubits. They work on a theory known as superposition, meaning they exist in different states or conditions simultaneously. When they are measured, they then become a definite state. Quantum computers use this to explore multiple possibilities and outcomes at once, making them much more powerful and faster than traditional computers. This involves cracking cryptographic codes much quicker and more efficiently.
The report by the Federal Reserve highlights how Elliptic Curve Cryptography (ECC) and RSA are the main methods used to encrypt most internet traffic, including blockchains. This has been such a great cybersecurity issue that the day the quantum computer arrives that will break them has been termed “Q-Day”.
What Can Cryptocurrency Do to Protect Itself?
Cryptocurrency and Bitcoin have two ways to protect themselves. These generally focus on improving or replacing the concepts of hash functions and digital signatures.
A hash function puts data into compressed outputs. This is crucial for Bitcoin’s transaction system and proof of work consensus. Quantum computers would be able to rewrite this historical data. This means that there must be a search for a quantum-resistant hash function.
Digital signatures are the next issue. They provide ownership of funds and use algorithms to ensure only owners of wallets can authorize transactions. Bitcoin currently uses ECDSA and the more recent Schnorr signatures to validate these, but they are breakable by quantum systems. Thus, new types of signatures are being researched. Concepts such as Lamport signatures claim to be quantum-resistant and will allow users to migrate their funds to wallets that use them.
The problem with all of this is that it needs consensus. When it comes to hash functions, this would need to come from miners and nodes, but it is possible, especially if quantum computing poses a grave threat to the ecosystem. With regard to the contents of long-disused wallets, it gets harder. Modifications or restrictions to them are the only option, but this would spark huge debates about the nature of decentralization. Should one of these long-held wallets be opened and sold, the content would be equivalent to a huge whale dump and could damage the markets.
In addition to this, it will also transform the nature of mining. Quantum computers will give a huge unfair advantage, which in itself will be a threat to decentralization. While Bitcoin and the blockchain have long been built upon this concept, it may be that to truly overcome the threat, decentralization needs to be put on the back foot, ensuring the safety of digital networks in the face of new technology.