Cross-platform finance

Introduction

The banking industry always needs more security. Breaches in bank’s security make them lose money either because of theft or because they get find by regulators. The care on data security in banking stems from the fact that, to some extent, the world’s economy relies on the bank’s security.

A specific set of tasks that requires high levels of security is the operations between banks. The SWIFT system, designed for this purpose, is presented as “The global provider of secure financial messaging services”. In practice, SWIFT is used to emit messages for international financial operations.

In 2015, a spectacular attack on SWIFT led to a $101 million theft from the central bank of Bangladesh. This attack was based on the emission of unauthorized money transfer orders. These orders were then erased from transaction databases to erase any trace of illegal money movement.

Threats in the financial world

Quantum cryptography could be useful to strengthen the security around the breaches that were exploited for these attacks. Properties such as non-repudiation, i.e. the impossibility for a bank to deny having sent a message received by another bank, can be found in quantum digital signatures, and quantum tokens could be used for a better tracing of messages.

In this case, the assets that are moving between banks represent money. For this reason, a quantum SWIFT system based on quantum money and quantum digital signatures could offer very high security guarantees.

Platform money

Quantum networks is one of the many transformations that the banking industry is experiencing. Another important transformation is that money is turning more and more into a purely digital asset. Beyond the mathematical challenges regarding the security of those digital assets, there is a deeper question on how to maintain trust in this new situation. Once again, cryptography can help to bring trustfulness to end-users. Two paradigms epitomize the digital transform of financial assets: platform money and blockchain.

In the digital world, supply and demand are handled by digital platforms. While their original role was to manage the multitude of users and data, the services they offer have widely diversified over the last twenty years. Platforms like Amazon, Microsoft, PayPal or Facebook are building ecosystems rather than just servicing customers.

With this respect, it is not surprising that Facebook announced in June 2019 that it was working on its own money, Libra. Although this project has not been deployed yet, this is a trend that banks are looking at seriously, trying to anticipate what their role will be in such an economic environment. It is clear that a systemic bank is also building an ecosystem rather than servicing customers. Anticipating changes for such institutions means they should understand not only their business, but also what their main values are. What is the value of a systemic bank in a quantum world?

Quantum technologies are an opportunity for banks to push further the trust relationship with their customers. As we mentioned, cryptography can be used to build trust between users of digital systems, which explains its wide adoption by the financial sector. In fact, systemic banks are more than financial operators. They also establish a deep trustful relationship with their customers. We trust banks to keep our money stored in their vaults, and to ensure the stability of the world’s economy.

In a world of platform money, banks would have to maintain and expand this trust relationship to platforms. The strong security guarantees of quantum money and quantum digital signatures could be an asset to establish trustful relationship between platforms.

Blockchain and decentralized Finance

Decentralized finance is an extreme case in which all the trust is put into cryptography while fully removing third parties such as banks. This area is growing based on the progress of the blockchain technology, the key technical element behind bitcoin and other cryptocurrencies.

The main reason for this development is clear. On the one hand, third parties are weak links in the security chain. Most of the security measures should be concentrated there, which may be difficult to achieve when addressing, for example, emerging financial markets. Decentralization is a way to mitigate the risks while developing new financial tools. On the other hand, increasing the liquidity of digital assets implies having various blockchain technologies that are compatible one with another. This allows to have tools to connect markets one to the other and avoid isolation.

In the case of cryptocurrencies, the most important role of the blockchain is to avoid double spending. How can this security goal be achieved in a world with multiple blockchains? This question is can be phrased in general terms as designing secure cross-chain operations.

The potential consequences of quantum communications on blockchain have been widely studied. One obvious reason is that most implemented blockchains are not secure against attacks by quantum computers. It is possible to design quantum-secure cryptocurrencies using quantum key distribution and quantum digital signatures. More interestingly, quantum money can be used to get better scaling for blockchain, a crucial problem for the sustainability of this technology. The unforgeability and unclonability of quantum money could be helpful to design secure cross-chain operations. Quantum coins can only be spent once, which seems to offer a solution to the double-spending problem. That would require sending those quantum tokens on quantum networks.