Gary Gensler, chairman of the US Securities and Exchange Commission (SEC), has declared a pivot away from cryptocurrency and toward artificial intelligence.
Although Gensler has previously warned of the dangers and difficulties associated with the bitcoin business, he now thinks that artificial intelligence is the technology that “warrants the hype” and should receive more scrutiny from authorities.
Seeing Russian chess grandmaster Garry Kasparov’s notorious loss to IBM’s supercomputer Deep Blue in 1997 piqued Gensler’s interest in AI.
Gensler, now a professor at MIT, has devoted more time to researching artificial intelligence and has co-authored a seminal work on the dangers of deep learning to the economy.
The possible consequences of AI-powered widespread automation in the financial sector have prompted him to reconsider previous regulatory methods. According to Gensler, there are substantial risks that must be handled, despite the fact that AI can deliver enormous benefits to financial organizations and their clients through improved predictive skills.
Warning that mass automation can have cascading implications for trillions of dollars in assets that trade on markets overseen by the SEC, Gensler explains the potential fallout of widespread automation.
Gensler is particularly worried about the prospect of bad outcomes being covered up by AI. Market volatility and instability could rise as a result of coordinated AI models across major trading companies, a phenomena that current regulatory regimes may not be able to handle.
Therefore, Gensler has proposed a legal framework for AI in the financial sector, marking an early and decisive action in this area. His plan would have brokerages and asset managers scrutinize how they employ artificial intelligence and predictive data for potential conflicts of interest, such as when client needs and firm goals diverge.
Despite this adjustment, the SEC will continue to enforce regulations regarding cryptocurrency.
The SEC has pursued legal action against prominent cryptocurrency companies like Ripple, Binance, and Coinbase under Gensler’s leadership. Several pending litigation shows that the SEC is serious about following through on its threats to punish fraudulent Bitcoin businesses.
Gensler’s focus on AI is well-timed, as the technology is making great gains toward automating many aspects of the financial sector.
While AI has the potential to dramatically improve many sectors of the economy, its unrestrained development could lead to dangerous consequences. Gensler hopes to achieve a happy medium between fostering innovation and protecting the market and investors by focusing the SEC’s attention on artificial intelligence.