FINANCIAL-SYSTEMS SECURITYEmerging Threats to the U.S. Financial System
In early 2021, a freewheeling, freethinking group of investors on Reddit plowed their money into GameStop, a video game retailer that several big hedge funds had bet against. The stock price shot up, some people made millions—and, to the delight of those on Reddit, the hedge funds had some very bad days. Researchers saw the GameStop story as a cautionary tale. If investors on Reddit could work together to move the markets like that, what could an adversary like China do?
In early 2021, a freewheeling, freethinking group of investors on Reddit decided to flex some collective muscle. They plowed their money into GameStop, a video game retailer that several big hedge funds had bet against. The stock price shot up, some people made millions—and, to the delight of those on Reddit, the hedge funds had some very bad days.
Hollywood turned this all into comedy with the 2023 movie Dumb Money. But researchers at RAND also saw the GameStop story as a cautionary tale. If investors on Reddit could work together to move the markets like that, what could an adversary like China do?
The researchers started looking for other emerging or understudied threats to the U.S. financial system. In a recent report, they warned that the greatest danger is not a single, sudden attack, a financial 9/11. It’s the constant assault on reality—the deepfake videos and manipulated AI—that could weaken the financial system over time. It will be slow, but it will be steady and hard to stop—more like financial climate change.
“There are so many players in the markets, and they all have to interact and coordinate in specific ways for the markets to work,” said Tobias Sytsma, an associate economist at RAND who led the study. “When you throw sand into those gears, all of a sudden the markets get less efficient and can start to break down. And when that happens, it impacts not just financial sectors, but households. People’s savings disappear. It impacts all of society.”
The researchers convened focus groups at RAND. They interviewed experts in government, academia, and industry. Their main question was always the same: Which threats to the financial system should we be paying closer attention to? They came away with four answers.
1. Social engineering by meme. This is the GameStop story, weaponized. An adversary could flood social media with memes to create a frenzy around a particular stock or sector. Prices would rise—but then could come crashing back down, wiping out fortunes and destabilizing the broader market.
2. Attacks on AI. Around 80 percent of U.S. stock trades are executed by algorithm. Experiments have shown that tweaking as little as one word in the data fed into an investment model can wreck its performance over time. An adversary could try to target major financial institutions by leaving poisoned crumbs of data on social media for computers to scrape up and ingest.
