IBM says it has cracked a longstanding cryptographic challenge, enabling the deep and unlimited analysis of encrypted information - data that has been intentionally scrambled - without sacrificing confidentiality.
The vendor claims its researcher, Craig Gentry, has used a mathematical object called an "ideal lattice" to achieve "fully homomorphic encryption" which allows the same detailed analysis as if the original data was fully visible.
IBM says the technique could have massive implications for the financial services sector, particularly in relation to cross-border regulation.
The system would enable regulatory bodies to process complex analytics on confidential data from multiple sources and domains. Until now individual national privacy and data protection laws have prevented pooling of data across regulatory boundaries for this purpose.
Homomorphic encryption could also help strengthen the business model of cloud computing, enabling vendors to perform computations on clients' data at their request, such as analysing sales patterns, without exposing the original information.
This week an IBM survey of over 350 Wall Street IT professionals found that 46% of respondents predict that cloud computing will force significant business change this year, up from 21% in 2008.
Charles Lickel, VP, software research, IBM, says: "Fully homomorphic encryption is a bit like enabling a layperson to perform flawless neurosurgery while blindfolded, and without later remembering the episode. We believe this breakthrough will enable businesses to make more informed decisions, based on more studied analysis, without compromising privacy."