HKMA chief warns of AI bubble and quantum hack risk by 2029

Eddie Yue Wai-man, chief executive of the Hong Kong Monetary Authority (HKMA), sounded the alarm over an artificial intelligence (AI) bubble risk and the looming threat of quantum computers capable of breaking encrypted financial systems. Speaking on a radio show, Yue cautioned that current market euphoria around AI might hide underlying vulnerabilities, particularly as capital expenditure and financing in the sector rise through debt markets, private credit, and corporate bonds. He warned that a stock market correction coinciding with geopolitical events could trigger inflation anxieties and fears of rising interest rates, creating a 'stacking of risks.' Yue emphasized that Hong Kong's banks must maintain strong capital buffers, rigorous risk management, and a resilient financial cushion to absorb sudden macroeconomic shocks. The HKMA will also focus on expanding the internationalization of the yuan in the coming years.

Yue's warning comes on the heels of a March warning from Google that quantum computers could potentially hack some encrypted systems by 2029, giving governments and companies limited time to safeguard data. The HKMA chief stressed the need for Hong Kong to prepare for an AI market downturn and quantum-related security risks, urging financial institutions to build resilient systems now. While the AI sector promises transformative benefits, its commercial viability remains uncertain. The confluence of AI market speculation, geopolitical instability, and emerging quantum threats presents a complex risk landscape that demands proactive mitigation strategies from regulators and banks alike.