Quantum Computing Leap: Impact on Geopolitics, Cryptocurrencies
A recent breakthrough in quantum computing could rattle cryptocurrency markets and amplify techno-geopolitical competition.
A recent breakthrough in quantum computing may threaten modern encryptions in security and cryptocurrency infrastructures. And geopolitical competition between technological rivals like the U.S. and China will amplify export controls and restrictions on quantum-sensitive technologies.
Google has unveiled a quantum computing chip, "Willow," capable of remarkable computational feats. With 105 qubits, it can solve problems in under five minutes that would take today’s top supercomputers approximately 10 septillion years.
Access my previous outlook and analysis on quantum computing here:
Given the large-scale applications in finance, logistics, drug discovery, and materials science, investment has been surging and is projected to swell. The U.S. continues to lead in qubit count, corporate investment, cloud and software quantum services, and other quantum-related infrastructure.
While few quantum computing-specialized companies have IPO’ed, 75% or so have been out of the US, with zero coming out of China. Beijing’s vertical industrial strategy - different from its multi-decade horizontal framework - has directed more funding towards R&D for quantum computing.
Given the strategic value of this frontier technology for Beijing, private foreign investment is prohibitively difficult. Meanwhile, the U.S.’ techno-ecosystem and comparatively stronger corporate funding environment makes it a regional leader in global quantum computing market share.
Source: Precedence Research
Beyond its computational power, Google’s Willow addresses a critical barrier in quantum technology: error correction. By leveraging advanced techniques, Google’s team exponentially reduced error rates—a breakthrough that researchers have pursued for nearly three decades.
The error rate was halved through improved quantum error correction, demonstrating a scalable solution that enhances the reliability of quantum systems as they grow in complexity.
This progress represents a significant step toward realizing the practical potential of quantum computing while amplifying concerns about its disruptive capabilities.
Geopolitics
As I reported in my last Strategic Intelligence report, US-China tech relations have each side firing policy bullets at the other. Washington layered additional export controls on strategic technologies, and Beijing responded with restricting access to key resources with military and commercial uses.
But the secular trend of economic and technological de-coupling is going to continue oozing into frontier technologies. Below is a short timeline of U.S. restrictions Washington imposed to limit China’s progress in quantum computing:
November 24, 2021: The U.S. Department of Commerce's Bureau of Industry and Security (BIS) added eight Chinese technology entities to the Entity List for supporting China's military quantum computing applications. This action imposed specific licensing requirements, restricting their access to U.S. quantum technologies.
October 7, 2022: BIS introduced new export controls targeting China's access to advanced computing and semiconductor manufacturing items. These controls aimed to counter China's advancements in high-tech capabilities, including quantum computing, by restricting the export of critical technologies that could enhance China's military and surveillance capacities.
May 9, 2024: BIS added 37 Chinese entities to the Entity List, including 22 involved in China's quantum technology advancements. This action imposed specific licensing requirements, limiting their access to U.S. quantum technologies.
September 6, 2024: BIS implemented new export controls on quantum computing items, including quantum computers, related equipment, components, materials, software, and technology pertinent to their development and maintenance. These measures aimed to prevent adversaries from acquiring advanced technologies that could threaten U.S. national security.
Looking ahead, Washington’s export controls on quantum technologies are likely to broaden in scope and deepen in sophistication. Future restrictions may target adjacent supply chain components, such as cryogenic systems, photonic circuits, and highly specialized software integral to quantum machine learning.
Additionally, the U.S. may seek to impose secondary sanctions on entities in allied nations that re-export restricted goods or provide indirect support to Chinese quantum initiatives. The framework could echo prior strategies in semiconductor controls, emphasizing collaborative enforcement with European and Asian partners.
China’s response will likely entail a mix of accelerated domestic innovation and strategic countermeasures. Beijing may double down on state-backed quantum research initiatives, leveraging its centralized planning model to narrow the gap in critical technologies.
This effort will likely feature increased funding for quantum hubs like Hefei and Shenzhen, coupled with incentives to attract foreign talent and investments.
Parallel to these domestic efforts, China is expected to deepen ties with non-Western partners, particularly Russia and nations in the Global South to secure alternative supply chains and mitigate dependency on U.S.-aligned countries.
In retaliation, China could impose targeted resource embargoes or restrictions on rare earth elements critical to quantum hardware production. Such moves would exacerbate existing vulnerabilities in Western supply chains, compelling governments to diversify their sourcing efforts and stockpile essential materials.
Additionally, Beijing may escalate its technological espionage campaigns, intensifying efforts to acquire proprietary quantum technologies through cyber operations or industrial partnerships abroad.
Geopolitically, the quantum computing race will may begin to resemble a bifurcated global ecosystem. The U.S.-led bloc may establish multilateral agreements to harmonize export controls, share research developments, and secure intellectual property within a trusted circle of allies.
Conversely, China and its partners could create an alternative technological ecosystem, promoting indigenous standards and circumventing Western control frameworks. The competition between these systems will extend beyond quantum computing itself, shaping the broader dynamics of technology governance, trade flows, and innovation pathways.
For now, quantum technology remains nascent, with practical applications several years away. However, the trajectory of export controls and countermeasures is shaping the strategic environment well before quantum systems become operational.
The geopolitical stakes are set to escalate as advancements transition from theoretical milestones to disruptive applications in encryption, artificial intelligence, and military command systems.
Impact on Bitcoin, Cryptocurrencies
Bitcoin's security relies on robust cryptographic systems that make it resistant to quantum computing—at least for now. Transactions use a two-way hash function that keeps public keys concealed until a transaction begins, rendering idle funds "quantum-resistant." Attackers cannot exploit hidden information in such cases.
Quantum vulnerabilities emerge when a transaction exposes the public key, but this creates only a narrow attack window of 5 to 30 minutes before the transaction is recorded on the blockchain.
While most Bitcoin users are shielded by this time constraint, funds stored using older Pay-To-Public-Key (P2PK) formats, such as those from the early "Satoshi era," are more susceptible. P2PK exposes public keys indefinitely, providing attackers with extended opportunities.
Recent breakthroughs in quantum computing have reignited concerns about digital asset security vis-a-vis Google’s 105-qubit "Willow" chip.
However, current quantum computing capabilities operate on a linear scale and do not yet pose a credible threat to Bitcoin. For a quantum computer to compromise Bitcoin’s security, it would need far greater computational power.
The encryption methods underpinning Bitcoin—Elliptic Curve Digital Signature Algorithm (ECDSA 256) and Secure Hash Algorithm 256-bit (SHA-256)—are theoretically vulnerable but require over a million qubits to crack. SHA-256, in particular, might demand a quantum computer with millions of qubits.
Bitcoin's pseudonymous creator, Satoshi Nakamoto, anticipated the risks of quantum computing as early as 2010, proposing that if SHA-256 were compromised, Bitcoin could transition to a new hash function via a blockchain fork. To maintain resilience, Bitcoin would therefore likely need a hard fork to integrate quantum-resistant cryptographic protocols.
Such a transition would preempt potential vulnerabilities and safeguard its ecosystem against evolving technological threats. For now, Bitcoin’s security architecture remains sufficient to counter quantum risks, but continued innovation in cryptography would be essential to its structural integrity.