US Securities and Exchange Commission (SEC) chairman Gary Gensler has announced a shift in focus from cryptocurrency to AI.
Gensler, who has been vocal about the risks and challenges posed by the cryptocurrency industry, now believes that AI is the technology that “warrants the hype” and deserves greater attention from regulators.
Gensler’s interest in AI dates back to 1997 when he became intrigued by the technology after witnessing Russian chess grandmaster Garry Kasparov’s infamous loss to IBM’s supercomputer, Deep Blue.
As an MIT professor, Gensler delved deeper into the study of AI, co-authoring a significant paper in 2020 that highlighted the risks posed by deep learning in the financial system.
His concern over the potential implications of mass automation using AI in the finance sector has led him to reevaluate regulatory approaches. Gensler believes that while AI can bring immense benefits to financial firms and their clients through enhanced predictive capabilities, it also carries significant risks that need to be addressed.
“Mass automation can have cascading implications for trillions of dollars in assets that trade on markets overseen by the SEC,” warns Gensler.
One of Gensler’s key concerns is the potential use of AI to obscure responsibility and accountability when things go wrong. Coordinating AI models among major trading houses could lead to increased market volatility and instability, a phenomenon that current regulatory regimes might not be equipped to manage.
As a result, Gensler has taken a proactive step by proposing one of the first regulatory frameworks for AI in the finance industry. His proposal requires trading houses and money managers to carefully evaluate their use of AI and predictive data to identify any conflicts of interest, especially when the interests of clients clash with company profits.
However, this shift in focus does not mean the SEC is easing its crackdown on cryptocurrencies.
Under Gensler’s leadership, the SEC has actively pursued legal action against major crypto firms like Ripple, Binance, and Coinbase. Several lawsuits are currently pending, signalling that the SEC remains committed to enforcing its actions against cryptocurrency companies that engage in scams and fraudulent activities.
Gensler’s emphasis on AI comes at a crucial time when the technology is making rapid strides in automating various financial processes.
While AI holds tremendous promise in revolutionising the industry, its unchecked growth could also lead to unforeseen challenges. By directing the SEC’s attention towards AI, Gensler aims to strike a balance between promoting innovation and safeguarding market integrity and investor interests.
(Copyright: AI News SEC turns its gaze from crypto to AI (artificialintelligence-news.com)