Sygnum executive: Banks must start Ethereum quantum preparations by 2027

Banks that want to be ready for Ethereum’s planned quantum-resistant upgrade should begin overhauling their custody systems by 2027, according to Thomas Brunner, head of custody and staking at Sygnum Bank. The warning comes as Ethereum developers weigh a timeline that could see Layer 1 transition to quantum-resistant cryptography by 2029, although that date remains tentative.

Why the 2027 deadline matters

Brunner highlighted that preparing for quantum-resistant signatures is not a simple software update. Future cryptographic methods will require strict controls, including a ban on reusing the same key. This creates a direct conflict with current banking practices, where systems are often duplicated or rolled back to earlier states during backup and disaster recovery processes.

Identifying a bank’s cryptographic keys and related systems alone can take six months to a year, Brunner explained. After that, institutions must account for hardware support, certification, internal reviews, external audits, and regulatory approvals. Given the complexity, starting in 2027 would give banks roughly two years to complete the work before Ethereum’s proposed 2029 transition.

The scope of the challenge

Quantum computers, once sufficiently advanced, could theoretically break the elliptic curve cryptography that secures most blockchain networks today. Ethereum’s developers are proactively exploring post-quantum signature schemes to future-proof the network. However, the migration is not just a technical issue for the protocol itself—it has significant implications for the financial institutions that hold and stake digital assets.

Banks operate under strict regulatory frameworks that mandate audit trails, failover capabilities, and disaster recovery plans. These requirements often involve copying or restoring system states, which would be incompatible with a post-quantum regime where key reuse is forbidden. Adapting these operational models to new cryptographic standards is a substantial undertaking that requires careful planning and coordination across multiple departments.

What banks should do now

Brunner’s advice is to start early. The first step is conducting a comprehensive inventory of all cryptographic keys and the systems that rely on them. This includes not only custody platforms but also internal databases, communication channels, and any third-party services that handle sensitive data. Once the inventory is complete, banks can begin assessing the impact of quantum-resistant algorithms on their existing infrastructure.

Another critical area is hardware. Many hardware security modules (HSMs) and other cryptographic devices may not support the new algorithms, requiring upgrades or replacements. Certification and compliance reviews will also add time, as will coordinating with regulators who may need to approve the new security measures.

Industry context

Sygnum is a digital asset bank headquartered in Switzerland, and its position gives it a unique perspective on both traditional banking requirements and blockchain innovation. The bank’s warning aligns with broader discussions in the financial industry about preparing for the post-quantum era. Central banks, government agencies, and technology companies are all investing in quantum-resistant cryptography, but the blockchain sector faces additional challenges due to the decentralized and immutable nature of its systems.

While Ethereum’s 2029 timeline is not yet finalized, the risk of inaction is clear. Banks that wait until the last minute could face significant operational disruptions, security vulnerabilities, or loss of customer trust. The message from Sygnum is that proactive preparation is essential.

Conclusion

Ethereum’s planned quantum-resistant transition is a complex undertaking that will affect not only the network itself but also the banks and institutions that interact with it. According to Sygnum’s Thomas Brunner, the time to start preparing is now—or at least by 2027. With the right planning and early action, banks can ensure a smooth transition and maintain the security and integrity of their digital asset operations in the quantum era.

FAQs

Q1: What is Ethereum’s quantum-resistant transition?
Ethereum is planning to upgrade its Layer 1 network to use quantum-resistant cryptographic signatures by 2029, to protect against the potential threat of quantum computers breaking current encryption methods.

Q2: Why do banks need to prepare by 2027?
Preparing for quantum-resistant signatures involves complex changes to custody systems, including key management policies and hardware upgrades. Identifying and overhauling these systems can take over a year, so starting in 2027 would allow enough time before Ethereum’s proposed 2029 deadline.

Q3: What are the main challenges for banks?
Banks must adapt to rules that prohibit key reuse, which conflicts with backup and disaster recovery practices. They also need to update hardware, undergo certification and audits, and gain regulatory approval, all of which require significant time and coordination.