According to reports from Bloomberg, U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler downplays his focus on cryptocurrency to turn his attention to artificial intelligence, a technology he says “justifies the hype.”
Gensler, who has come to terms with an industry he claims is riddled with cryptocurrency scams and fraud, is now turning his attention to artificial intelligence (AI), a technology he considers “the most transformative of this generation.” As AI begins to automate many human processes in finance, Gensler warns of the dangers it can pose if left unchecked.
Technology and market risk
“Massive automation could have a cascading effect on trillions of dollars of assets traded in markets overseen by the SEC,” said Gensler. While the predictive capabilities of AI can help companies better serve their customers, it can also be used to obscure responsibility if things go wrong, he warned.
Gensler has a long history with technology, beginning his exploration of AI in 1997, following the loss of Russian chess grandmaster Garry Kasparov to IBM’s supercomputer, Deep Blue. Later, as an MIT professor, Gensler delved into the study of AI, co-authoring a 2020 paper on the risks of deep learning to the financial system.
Gensler argues that current regulations are not equipped to manage these hazards. His paper noted that coordinating AI models between major trading houses could lead to greater market volatility and instability. As SEC chief, Gensler has regularly spoken about the potential positive and negative consequences of new AI and machine learning tools.
In July, Gensler proposed one of the first regulatory frameworks for AI, requiring trading houses and money managers to evaluate whether their use of AI or predictive data could lead to conflicts of interest, particularly regarding client interest versus corporate profits.
Gensler’s shift in focus to AI does not indicate that the SEC is losing its grip on cryptocurrencies. Several lawsuits involving major crypto companies such as Ripple, Binance and Coinbase are pending, indicating that the SEC under Gensler’s leadership remains determined to enforce its current actions against crypto companies.
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