Finance –
The finance industry is a large and intricate system of institutions and services (including banks, investment firms, and financial technology companies) that manage money, handle risk, and power economic activity. It is a cornerstone of the U.S. economy, facilitating capital formation, driving innovation, supporting job creation, and enabling economic growth across all sectors. The U.S. finance industry is also critical to national security because it allows the country to mobilize economic resources, fund defense initiatives, and exert geopolitical influence through financial mechanisms. This complex industry is undergoing rapid transformation, driven by technological disruption, market fragmentation and consolidation, interest rate sensitivity, the growing importance of nonbank financial institutions, and an evolving paradigm of assessing risks with an increasing focus on geopolitical and national security issues. These trends create vulnerabilities that demand examination of specific areas where disruption and strategic risk are concentrated.
The finance industry is characterized by intense competition and vulnerability to disruption. While traditional firms benefit from regulation and scale, technology, consumer empowerment, and new entrants are shifting the balance of power. At the same time, countries like China and Russia are using their financial systems to challenge the U.S. This combination of factors increases the risks to the U.S. financial system.
To address these issues, the report recommends:
- Legislative Action: Clarify digital asset regulation—distinguishing payment tokens, securities, and commodities—and enhance the Corporate Transparency Act (CTA) to restore comprehensive beneficial ownership disclosures.
- Executive Measures: Mandate the Department of Defense (DOD) blockchain logistics pilots; expand Cybersecurity and Infrastructure Security Agency’s (CISA) resilience mandates; and streamline Committee on Foreign Investment in the United States (CFIUS) procedures to accommodate digital asset transactions while preserving security guardrails.
- Public Private Partnerships: Deepen co-investment through In-Q-Tel (IQT), Defense Innovation Unit (DIU), and allied venture initiatives; establish joint finance defense intelligence sharing forums.
- Technological Modernization: Deploy further artificial intelligence (AI)-driven Anti Money Laundering (AML) and anomaly detection; adopt International Organization of Standards (ISO) 20022 messaging standards for cross-border payments; codify digital asset security protocols.
The U.S. finance industry is a critical pillar of economic strength and national security, enabling innovation, capital formation, and global influence. However, it faces mounting risks from technological disruption, strategic competition, regulatory shifts, and geopolitical threats, particularly from rival financial systems like those of China and Russia. The U.S. financial system is a vital strategic asset that requires proactive measures to address emerging challenges and ensure its continued contribution to U.S. national security, economic strength, and global influence.
Read the report →