Post-Quantum Security Is Now a Contract and Standard-of-Care Issue

By Laith Sarhan

Data Protection & Cybersecurity

When the Communications Security Establishment (CSE) estimates that a cryptographically relevant quantum computer (CRQC) could emerge as early as the 2030s, corporate and technology counsel might be tempted to leave post-quantum cryptography (PQC) on the back burner.

That would be a mistake. Between "harvest now, decrypt later" (HNDL) attacks—where threat actors intercept encrypted data today to decrypt once quantum hardware matures—and a coordinated wave of 2025–2026 Canadian regulatory and procurement directives, post-quantum readiness has crossed over from computer science into current legal, supervisory, and contractual risk.

Following our panel at the 2026 CAN-TECH Fall Conference (Quantum Computing and Post-Quantum Security: Preparing for the Next Cryptographic Shift), here is how Canadian counsel should think about the evolving standard of care, statutory developments, and technology contracting.

1. Two Distinct Threats: Confidentiality in Transit vs. Digital Signature Forgery

For legal and risk teams, it helps to separate the quantum threat into two distinct buckets:

2. The "Soft-to-Hard Law" Escalator in Canada

We do not have—and likely will never see—a standalone "Quantum Computing Act." Instead, legal obligations in Canada are hardening across three steps:

Step 1: Regulator Roadmaps as the Standard of Care Yardstick

In June 2025, the Canadian Centre for Cyber Security released its Roadmap for the Migration to Post-Quantum Cryptography (ITSM.40.001), setting milestones for initial migration plans by April 2026, migration of high-priority systems by the end of 2031, and remaining systems by 2035. In January 2026, the G7 Cyber Expert Group released its coordinated PQC roadmap for the financial sector, and in March 2026, OSFI followed up with its Technology Risk Bulletin on Quantum Readiness Phases and Timelines for federally regulated financial institutions (FRFIs).

While none of these documents is a statute, under PIPEDA Principle 4.7 and common-law negligence, the legal duty to maintain "appropriate" and "reasonable" safeguards is measured against published regulator and industry benchmarks. Crucially, the Cyber Centre roadmap specifies that a PQC migration is only complete when quantum-vulnerable algorithms are "disabled, isolated, or tunnelled"—meaning mere technical support for PQC is not compliance.

Step 2: Live Supervisory and Federal Procurement Mandates

For FRFIs, OSFI’s March 2026 bulletinintegrates quantum readiness—including cryptographic inventories, HNDL assessments, and third-party vendor evaluations—into existing supervisory expectations under Guideline B-13 (Technology and Cyber Risk Management) and Guideline B-10 (Third-Party Risk Management).

Meanwhile, under the Treasury Board of Canada Secretariat’s Security Policy Implementation Notice (effective October 2025), all federal contracts with a digital component entered into after April 1, 2026 must include PQC-aligned procurement clauses. Just as GDPR normalized Data Processing Addenda across commercial supply chains, federal procurement and bank vendor questionnaires are now pushing PQC requirements into private-sector MSAs.

Step 3: Hard Statutory Teeth — Bill C-8 and Bill C-36

On June 15, 2026, Bill C-8 (An Act respecting cyber security, S.C. 2026, c. 9) received Royal Assent.

Part 1 amended the Telecommunications Act and is in force today, empowering the Minister of Industry and Cabinet to compel telecom service providers to implement specified technical standards, audit procurement plans, or remove high-risk vendor equipment under administrative monetary penalties (AMPs) of $10 million to $15 million per day.

Part 2 enacts the Critical Cyber Systems Protection Act (CCSPA) covering banking, clearing and settlement, energy, nuclear, and federal transport. Once Cabinet issues its Order in Council designating operator classes under Schedule 2, operators will face a 90-day statutory clock to establish an auditable cybersecurity program, a 72-hour incident reporting ceiling, and an affirmative statutory duty (s. 15) to mitigate supply-chain and third-party risks, backed by AMPs up to $15 million per day.

3. Practical Playbook: Three Things Counsel Should Do Now

1. Take a Seat at the Cryptographic Inventory Table

OSFI’s March 2026 bulletin highlights building a cryptographic inventory and assessing third-party dependencies as foundational steps. Legal teams have two critical roles here:

2. Triage Vendors Using the ITSM.00.501 Drafting Rule

In September 2025, the Cyber Centre published Recommended Contract Clauses for Cryptography (ITSM.00.501), featuring model clauses that require vendor cryptographic modules to support PQC for key establishment and digital signatures by the end of 2026. When adapting these clauses for private-sector technology contracts, triage vendors into three tiers:

3. Draft "Cryptographic Agility" Around Cost Allocation

As emphasized in the G7 Cybersecurity Working Group’s Joint Statement, systems must be built with cryptographic agility—modular architectures that allow algorithms and key lengths to be swapped without rebuilding infrastructure from scratch. In a commercial technology contract, crypto-agility comes down to three clauses:

  1. No Surprise Change Orders: Explicitly state that cryptographic updates required to maintain compliance with evolving NIST or Cyber Centre standards are included in standard annual maintenance and support fees.
  2. Configurability Warranty: Require that cryptographic algorithms, parameter sizes, key lengths, and crypto periods be configurable via vendor-signed software updates without hardware replacement (per ITSM.00.501).
  3. Remediation SLAs & Subcontractor Flow-Down: Set clear patching timelines when an algorithm is deprecated or downgraded, and flow those obligations down to sub-processors.

4. Conclusion: Don't Wait for "Q-Day" to Update Your Templates

Courts and regulators will never fault an organization for failing to predict the exact date a cryptographically relevant quantum computer comes online. They will, however, scrutinize organizations that ignored the 2025 and 2026 government roadmaps, signed multi-year technology contracts without cryptographic agility, or allowed decades-long sensitive data to cross public networks over legacy encryption.

While the underlying engineering migration will take years to execute, the immediate legal steps are straightforward: update your standard vendor security schedules, build PQC and CBOM questions into procurement and M&A due diligence, and ensure Legal has a seat at the table as your organization builds its cryptographic inventory.

FAQ

Is there a Canadian statute that explicitly mandates post-quantum cryptography for private-sector companies today?

No standalone statute uses the words "post-quantum cryptography." Instead, the obligation arises through three channels: (1) hard contractual mandates for federal suppliers under the Treasury Board's April 1, 2026 procurement notice; (2) supervisory expectations for banks and insurers under OSFI's March 2026 bulletinand Guidelines B-13 and B-10; and (3) technology-neutral statutory duties under PIPEDA Principle 4.7, Bill C-8 (the Critical Cyber Systems Protection Act), and proposed Bill C-36 (the Protecting Privacy and Consumer Data Act), all of which look to published Cyber Centre and NIST standardsto define "reasonable" or "appropriate" security safeguards.

If our website or cloud provider already uses AES-256 encryption, are we already quantum-safe?

Only partially. Symmetric encryption algorithms like AES-256 and hash functions like SHA-384 are resistant to quantum attacks. However, the public-key algorithms (RSA, Diffie-Hellman, ECDH, and ECDSA) used to establish encryption keys in transit and to verify digital signatures and certificates are vulnerable to quantum attack. Even if your database at rest uses AES-256, you must still verify how those keys are exchanged over the network and how your master keys are wrapped inside your Key Management System (KMS) or Hardware Security Module (HSM).

Why can't our IT team just swap out RSA or ECC for the new NIST post-quantum algorithms overnight?

As NIST finalized its initial PQC standards in 2024 (ML-KEM, ML-DSA, and SLH-DSA), organizations found that post-quantum public keys and signatures are significantly larger in byte size than classical keys. Those larger sizes can cause network packets to fragment, exceed memory limits on embedded/IoT chips, or break legacy protocols like TLS 1.2. Most organizations must deploy PQC in phases—often starting with "hybrid" key exchange—while isolating or tunnelling legacy systems that cannot be upgraded in place.

Update your standard Information Security Schedule or MSA template before your next major procurement or renewal cycle. Specifically, add an evergreen cryptographic compliance clause (requiring alignment with current Cyber Centre guidance in ITSP.40.111 and ITSP.40.062), a right to request a Cryptographic Bill of Materials (CBOM), and a crypto-agility cost-allocation clause confirming that algorithm updates required by NIST or Cyber Centre phase-out schedules are included in standard support fees rather than billed as custom change orders.