The global banking and financial services giant HSBC has tested tokenized physical gold trading using quantum-secure technology with great success.

A rising issue in the financial sector, this work represents a significant step in safeguarding digital assets from potential quantum computing threats in the future.

Tokenising gold: A new frontier in digital assets

Using distributed ledger technology (DLT), HSBC became the first global bank to provide institutional investors with tokenized actual gold in 2023. The decentralized digital ledger technology, or DLT, improves security and transparency in financial transactions by logging transactions across many computers.

"HSBC was the first international bank to offer tokenized physical gold and is now building on that innovation with cutting-edge cybersecurity protection for the future," says Philip Intallura, Global Head of Quantum Technologies at HSBC.

HSBC increased its offering this year by introducing HSBC Gold Token for retail investors in Hong Kong, building on its previous success. With the help of this product, actual gold may be owned in fractions, democratizing access to this priceless asset class.

"A big step toward making gold investing more accessible is the launch of HSBC Gold Token for retail investors," says Philip. "We're using technology to make financial products more inclusive as part of a larger strategy."

Technology that is quantum-safe: safeguarding digital assets for the future

HSBC used post-quantum cryptography (PQC) to evaluate the interoperability of its gold tokens as part of the experiment.

PQC is the name given to a class of cryptographic algorithms that are intended to fend against assaults from quantum computers, which are predicted to be able to crack a large number of encryption techniques now in use.

The bank showed off its capacity to change HSBC's gold tokens into ERC-20 fungible tokens, which are Ethereum blockchain tokens that adhere to certain technical specifications. The utility and interoperability of the tokens within the larger digital asset ecosystem are improved by this conversion.

HSBC collaborated with top quantum computing startup Quantinuum to develop this quantum-safe security. To demonstrate complete security of digital assets against quantum computing threats, Quantinuum used PQC algorithms in conjunction with its in-house developed Quantum Origin quantum randomness technology.

"As long-time partners in exploring commercial quantum applications, HSBC and Quantinuum are together building the next generation of financial services featuring quantum-hardened defences harnessing the power of today's quantum computers to safeguard sensitive data now and into the future," explains Ilyas Khan, the founder and chief product officer of Quantinuum.

Threats to come: The "store now, decrypt-later" conundrum

The danger of "store now, decrypt-later" (SNDL) cyber events was also covered in the trial. Using a method known as "SNDL," malevolent actors steal confidential information with the goal of utilizing powerful, yet-to-be-created quantum computers to decrypt it later.

As Philip points out, "we're actively shaping the future by addressing SNDL threats, rather than just preparing for it." This innovation shows that we can protect our digital asset offerings from any risks posed by quantum computing in the future.

Consequences for the finance sector

For tokenized gold trading, the successful trial of quantum-safe technology has important ramifications for financial services. Robust security measures that are resistant to future technical improvements are critical as digital assets become more widely used.

Tokenized assets combined with quantum-safe technologies create new opportunities for cross-platform interoperability. This may result in the exchange of digital assets across various blockchain networks and established financial institutions that is safer and more effective.

Ilyas continues, "New paradigms in financial security are being created by the convergence of blockchain technology and quantum computing." At the vanguard of this innovation is our partnership with HSBC, which is opening the door for a more robust digital financial infrastructure.

The capacity to safeguard digital assets from present and potential dangers will probably become a crucial differentiator for financial organizations as quantum technology is further investigated.

"We're creating a new standard for security and innovation in digital finance," says Philip in closing, "by combining tokenized assets with quantum-safe technology." This is about creating confidence in the future digital financial environment, not just about safeguarding assets."