Europol warns that cryptocurrency wallets face quantum threat

Europol warns: Quantum computing may threaten cryptocurrency wallets and long-term encrypted data

Europol has issued a warning that future quantum computers may threaten cryptocurrency wallets and long-term stored encrypted data. The agency urged the cryptocurrency industry to begin security preparations as early as possible before practical attacks become possible.

Core Summary

• Europol pointed out that quantum computers may expose cryptocurrency wallets by deriving private keys from public keys.
• The group recommends a phased migration to post-quantum cryptography to strengthen wallet security and improve key management practices.
• The National Institute of Standards and Technology (NIST) has identified three post-quantum standards and urged organizations to start migration efforts as soon as possible.
• Bitcoin developers are discussing post-quantum migration proposals, while hosting service providers are testing anti-quantum wallet controls and signature mechanisms.
• There is currently no clear evidence that the "intercept now, decrypt later" attack is being used systematically on a large scale.

On October 7, Europol released two reports that provide an in-depth analysis of how advances in quantum computing affect digital assets and sensitive information. The agency said it remains uncertain when quantum computers with sufficient capabilities will be available, but upgrading encryption systems in decentralized networks could take years.

The first report focuses on cryptocurrency wallets, while the second examines the potential risks of attackers storing encrypted information today for future decryption. Europol emphasized that current quantum machines are not yet able to crack the security protection of cryptocurrencies.

Quantum threat focuses on cryptocurrency wallet keys

Europol's cryptocurrency report identifies wallet authorization keys as the main potential point of exposure. Many blockchain systems rely on public key cryptography to prove that the wallet owner has authorized the transaction.

Once a quantum computer with sufficient computing power is available, the exposed public key can theoretically be used to calculate the corresponding private key. An attacker can then sign transactions and transfer assets without authorization.

The agency distinguishes between digital signatures and blockchain hash functions. Europol pointed out that the cryptographic hash function used for critical parts of blockchain security has relatively strong resistance to quantum attacks. Therefore, the report focuses on wallet signing, public key exposure, and key management issues.

Its research results do not predict the inevitable collapse of cryptocurrencies, but suggest a phased migration of backward quantum cryptography, requiring blockchain developers, wallet providers, policymakers and users to coordinate future upgrades.

Bitcoin developers are already discussing some related issues. Draft BIP-361 proposes plans to migrate from traditional ECDSA and Schnorr signatures after post-quantum Bitcoin output types are available. However, the proposal is still in the draft stage and has not yet been activated on the Bitcoin network. Previous bitcoin proposals have sparked a debate about how users can move vulnerable funds and what to do with dormant funds that have not been moved.

Quantum security efforts have touched cryptocurrency wallets

Some cryptocurrency custodians and blockchain developers have begun testing post-quantum systems before actual threats emerge.

Earlier this year, BitGo and Silence Laboratories tested a scheme based on post-quantum multi-party computing signatures. The demonstration used the ML-DSA algorithm and was designed to test how quantum-resistant signatures could be integrated into existing wallet infrastructure. Subsequently, BitGo introduced four controls for the institutional Bitcoin wallets it supports, including measuring public key exposure, consolidating outputs, and helping users transfer funds from higher-exposure addresses in future quantum scenarios.

Coinbase is also dealing with similar hosting issues. The company is designing the underlying infrastructure that can support different post-quantum signature schemes because Bitcoin developers have not yet selected a final alternative standard.

Other networks are advancing account-level changes. Sui plans to adopt optional quantum security certification based on a NIST approved signature scheme, with the goal of providing native post-quantum accounts to the main network in 2027. Monad researchers have proposed separating blockchain addresses from their authentication keys. This design allows keys to be changed without the user having to give up the same account address, and the proposal is still under development.

NIST standards provide developers with migration options

Europol's recommendation came after the National Institute of Standards and Technology (NIST) finalized its main post-quantum cryptography standard.

NIST officially approved FIPS 203, FIPS 204 and FIPS 205 standards in August 2024. These standards cover quantum-resistant key creation and digital signatures:

• FIPS 203 specifies ML-KEM (derived from CRYSTALS-Kyber) for establishing shared keys.
• FIPS 204 specifies ML-DSA (derived from CRYSTALS-Dilisium) for digital signatures.
• FIPS 205 uses a hash-based SLH-DSA signature system based on SPHINCS+.

NIST says organizations should immediately begin the transition to quantum-resistant systems. Its planned transition will phase out and ultimately remove algorithms that are vulnerable to quantum attacks from NIST standards by 2035, while high-risk systems will migrate earlier. In addition, NIST is also developing other options, such as the HQC key establishment algorithm selected for standardization in March 2025, and the FALCON digital signature standard under development.

As early as January this year, Europol had begun to resolve the relocation planning issue. A report on the financial services industry recommends a risk-based transition strategy that first identifies vulnerable crypto technologies and prioritizes related systems based on their exposure and importance.

Stored encrypted data faces independent quantum risks

A second report released by Europol explores what security researchers call the "Harvest Now, Decrypt Later" risk.

In this scenario, attackers collect encrypted information, even though they are currently unable to read the data. They will store this material until future computing systems have the ability to crack the encryption algorithms that protect the data.

Europol points out that this threat is most relevant to information that will need to be kept secret for years, including government communications, medical records, intellectual property and law enforcement documents.

The report, prepared with the assistance of the Universidad Carlos III de Madrid, states that actual exposure depends on the encryption protocol, configuration and key management methods used to protect the data. Europol found that there is currently no clear evidence that "intercept now, decrypt later" attacks are being carried out systematically on a large scale. Collecting and retaining large amounts of encrypted information requires huge storage, processing power and technical resources.

The report believes that long-standing and high-value information is more likely to be the target of such attacks. Europol recommends removing outdated protocols, reducing unnecessary data retention, and testing post-quantum systems before quantum attacks become practical.

Cryptocurrency migration may take years

The timetable remains the biggest uncertainty surrounding the quantum threat. There are currently no publicly demonstrated quantum computers capable of deriving cryptocurrency private keys on the scale of assets protected by modern blockchain signature systems. Therefore, Europol defines this issue as a preparation issue rather than an active cryptocurrency attack.

Migration itself can be difficult because decentralized networks require coordination between developers, wallet companies, exchanges, custodians, miners or validators, and individual asset holders. Charles Guillemet, chief technology officer of Ledger, has said that the biggest problem for Bitcoin may be how to securely migrate wallets and existing funds after developers agree on a new signature scheme. Sleeping coins and the failure of users to move assets pose additional technical and governance issues.

Galaxy Digital has invested in this. The company set up a $5 million project in July to fund Bitcoin research covering anti-quantum signatures, migration tools and security audits.

Europol's recommendations call on cryptocurrency projects to first identify exposed assets, improve wallet and key management practices, test post-quantum alternatives, and clearly communicate future migration requirements to users.