How Trump Can Make AI Great for America

The United States stands at a critical juncture in the global race for artificial intelligence (AI) supremacy. As the momentum for innovation escalates, the incoming Trump administration has a pivotal opportunity to shape a strategy that not only drives technological advancements but also safeguards the nation’s financial institutions against cyber threats. The stakes couldn’t be higher. The actions taken in the next few years will determine the future of American technological dominance.

A Bold Framework for AI Innovation

Central to this opportunity is the recent appointment of David Sacks as America’s “crypto and AI czar.” This move is a critical first step toward establishing a cohesive national strategy. It is essential that Washington understands the complexity of the regulatory landscape that financial institutions must navigate. Currently, these institutions are ensnared in a web of regulations enforced by multiple federal agencies, including the Federal Reserve, SEC, and the Department of Justice, resulting in a compliance nightmare.

In total, there are 15 distinct regulatory regimes that directly impact AI adoption in the financial sector. Each agency adds layers of bureaucracy that stifle innovation and inhibit competition. To unleash the full potential of AI, it is essential to untangle these regulatory messes and enable financial institutions to thrive in a global marketplace.

Regulatory Challenges and Explainability

One major regulatory concern is the “black box” nature of advanced AI systems. This raises questions about “explainability,” or the need to clarify the decision-making processes of machine-learning models. The challenge lies in finding the right balance between complexity and transparency. For high-stakes financial applications, the power of generative AI often trumps the advantages of simpler models. The focus should not be on stifling these innovations with restrictive rules but instead on enhancing capabilities for interpretation and validation.

Transforming Government Functions

AI has the power to revolutionize core functions within U.S. government financial regulatory agencies. With robust safeguards in place, generative AI could significantly enhance the Federal Reserve’s forecasting capabilities, enabling data-driven decision-making that could lead to greater institutional efficiency. This transformation is essential not just for the Fed but also for other regulatory institutions, helping them anticipate risks more effectively and streamline oversight.

Embracing New Technologies

As policymakers devise regulations for AI and financial technologies, they must consider emerging solutions like blockchain for data security and identity verification. The AI czar’s oversight of crypto will help unify regulations across both sectors, ensuring a comprehensive approach that fosters innovation.

The Cybersecurity Challenge

While AI innovation is critical, cybersecurity remains a pressing concern. Cyber attacks are the foremost technological threat facing the U.S., especially in the financial sector. A staggering 65% of financial institutions reported experiencing ransomware attacks in 2024. The Trump administration must put a robust plan into action to build a formidable cyber-defense system. To maintain technological supremacy, coordinated regulatory efforts across different agencies are necessary, coupled with substantial investments in enhancing America’s technological capabilities.

Attracting Talent to Fuel Innovation

Your commitment to leading in the AI arena cannot overlook the necessity of attracting and nurturing top-tier technical talent. This is particularly vital in the finance sector, where AI is revolutionizing investment analysis and risk management. The failure of the EU to adequately staff its AI Office amid regulatory ambitions serves as a cautionary tale. The U.S. should prioritize investments in AI education and create an ecosystem that draws in talent, leveraging the country’s powerful capital markets.

Regulation vs. Innovation

The true challenge lies not in overly stringent regulations but in fostering a responsible development of private-sector innovations. Rather than rush into imposing regulations that might stifle progress, the Trump administration should focus on creating a framework that sets clear guardrails for financial institutions while encouraging breakthrough advancements. Simultaneously, leveraging AI for national security should remain a top priority.

Conclusion

In conclusion, America has a unique opportunity to lead in AI innovation by adopting a balanced approach that promotes both technological advancements and prudent regulation. By fostering a robust AI policy framework that emphasizes innovation, strengthens cybersecurity measures, and attracts top talent, the U.S. can solidify its position as a global leader in AI and financial services. The time to act is now, and the future of America’s technological dominance hinges on it.

Author: Sarah Hammer, Executive Director at the Wharton School, Adjunct Professor at the University of Pennsylvania Carey Law School, former federal and state government official, and former asset management executive.