Banking and Finance Law Daily Wrap Up, FINANCIAL TECHNOLOGY—Banks should be aware of stablecoin risks, (Oct 16, 2025)
Organizations Mentioned:American Bankers Association
The ABA Banking Journal article outlines how quantum breakthroughs could disrupt the cryptographic foundations of blockchain-based assets, posing systemic risks to banks and the broader financial system.
The American Bankers Association has published an article in their ABA Banking Journal looking at the risks that financial institutions face with the profusion of digital assets. The article, Quantum Computing Threatens Stablecoin Security: What Banks Must Do Now, authors Joshua Hubbard and Uche Obiora outline how quantum breakthroughs could disrupt the cryptographic foundations of blockchain-based assets, posing systemic risks to banks and the broader financial system. The article highlights risks, including that cryptocurrencies rely on cryptographic mechanisms for security, which could expose digital wallets and transactions. According to the authors, stablecoins like USDC and USDT, operating on blockchain networks, share these vulnerabilities, and a quantum breach “could erode trust, impact liquidity, and disrupt U.S. Treasury markets.”
Stablecoins are increasingly embedded in payment systems, fintech platforms, and cross-border transactions, which links traditional banking with the crypto ecosystem. The passage of the GENIUS Act in July has further accelerated their adoption, according to the authors. Because stablecoins operate on the same blockchain infrastructure as other cryptocurrencies, they are vulnerable to the same quantum threats.
The article explains that cryptocurrencies rely on two key cryptographic mechanisms: the Elliptic Curve Digital Signature Algorithm (ECDSA) and the Secure Hash Algorithm (SHA-256). ECDSA is currently secure against classical computing attacks, but quantum computers running Shor’s Algorithm (a quantum algorithm that can efficiently factor large integers) could potentially derive private keys from public ones—especially when wallet addresses are reused. The authors warn that this could allow attackers to forge transactions and redirect funds before legitimate ones are processed.
Hubbard and Obiora note that SHA-256 remains resistant to Shor’s Algorithm, but they warn that institutions should transition away from vulnerable public-key systems. A breach in stablecoin infrastructure could erode investor confidence, trigger shifts in asset backing strategies, and affect liquidity and interest rates, they stress. Even institutions not directly involved in crypto could face reputational and operational risks if they are unprepared to advise clients or secure digital assets.
Recommendations. To mitigate these risks, the authors recommend several proactive measures:
Conduct quantum-specific risk assessments, including modeling when quantum computers could break current encryption and pinpointing where stablecoin reserves and payment systems would be exposed.
Prioritize migration to post quantum cryptography (PQC). Begin moving stablecoin and digital asset systems from ECDSA/Elliptic Curve Cryptography (ECC) to National Institute of Standards and Technology (NIST)-selected algorithms.
Engage with vendors and require fintech and cloud providers to share detailed roadmaps for PQC migration, including testing, pilot projects, and fallback mechanisms.
Strengthen internal controls by using multi-signature wallets, withdrawal limits and employee training to reduce theft risks. Do not place all crypto assets into a single wallet.
Prioritize education and support by providing clear explanations of how quantum risks affect stablecoins and what steps the bank is taking to protect digital assets. Transparency builds trust.
Companies: American Bankers Association
IndustryNews: BankingOperations Blockchain ChecksElectronicTransfers FinTech FinancialStability Privacy SecuritiesDerivatives