A new study warns that switching to post-quantum cryptography could break the wallet systems used by

Post-Quantum Crypto Could Break Exchange Wallets, Study Warns—BIP32 May Not Survive ML-DSA

Quantum computers aren't here yet, but the cryptography upgrade is coming—and it might break how exchanges handle addresses. New research from Project Eleven warns that if blockchains migrate to post-quantum standards, the way most exchanges generate deposit addresses could stop working.

Right now, exchanges rely on hierarchical deterministic wallets (BIP32). The setup is clever: servers use a public key to generate fresh deposit addresses on the fly, while private keys stay offline in cold storage. It's efficient, it's secure—but it may not survive the quantum shift.

The problem? ML-DSA, a post-quantum digital signature standard from NIST. Researchers found that under this framework, the current architecture may simply not run. Project Eleven CTO Conor Deegan puts it bluntly: if Bitcoin adopts ML-DSA without a workaround, exchanges lose unhardened derivation. That means no more generating new addresses from a public key alone. For exchanges and payment processors, that's a massive operational headache.