SEBI Preparing Quantum Readiness 'Action Plan' For Market Ecosystem, Says Chairman Pandey

SEBI Chairman Tuhin Kanta Pandey on Wednesday announced that the capital market regulator is actively preparing the financial system to safely manage the security challenges posed by the coming era of quantum computing.

Pandey said quantum computing has the technological capabilities to make it possible for bad actors to compromise passwords, which were long presumed to be very secure and, hence, it is necessary to prepare the system on this front.

"SEBI has prepared an 'action plan' to ensure quantum readiness of all the stakeholders that it regulates," Pandey said at the annual Global Fintech Fest in Mumbai.

The career bureaucrat-turned-regulatory body chief said there is a possibility of quantum computing coming and once it comes, the normal cryptography used to set passwords may be the first ones to break.

Talking to the reporters, Pandey said, "Some fintech companies are leveraging blockchain technology and will provide demonstrations. We have a regulatory sandbox in place—its purpose is to test and experiment with different uses of DLT (Distributed Ledger Technology) and blockchain in a controlled, compliant environment."

"I am talking about cryptography. Quantum computing, or quantum-safe computing, is being discussed because if quantum computers arrive—which is highly likely given ongoing research—our current cryptography could be broken. In fact, cryptography itself would be the first to break. This is because cryptography underpins the security of digital systems, including passwords. With quantum computing, traditional cryptographic methods—like 128-bit encryption—could be compromised, meaning passwords may no longer be secure," added Pandey.

Meanwhile, answering a query on technology neutrality, Pandey said he does not see the holding of shares in paper form continue for long in a system that has transitioned to dematerialisation long back.

On the concept of technological neutrality, a hotly contested issue, he chose to go public with his skepticism with a nuanced take.

"Technology neutrality is actually not feasible," he said, adding that sticking to paper holding of shares will not be beneficial and one has to adopt the best technology position on offer.

Secondly, there is also the aspect of standardisation which technologies need to adhere with, Pandey said, adding that the internet would not have been possible without the protocols to connect an entire network of computers.

"You can have technology neutrality only to an extent where multiple technologies that are similar and which can connect," he said.

"As a regulator, I would say that we should adopt and embrace a technology both for our own good and for the good of the investor community we serve," Pandey added.

With inputs from PTI