The monopoly of artificial intelligence (AI) development for financial markets applications by big tech companies could destabilize the global economy, said SEC commissioner Gary Gensler. Chief warned on the 17th.
“AI could increase financial vulnerabilities,” Gensler said at the National Press Club in Washington. Because AI gets the same signals from underlying models and data aggregators, it can drive the phenomenon of individual actors making similar decisions.
Directs staff to recommend proposed regulations
“In the financial industry, conflicts can arise as long as advisors and brokers optimize (AI) to put their own interests above those of investors,” Gensler warned. It said it directed the SEC staff to make recommendations for proposed rules for the SEC to consider on how best to address these potential disputes in areas that involve investors.
Gensler’s remarks come as AI innovation accelerates and some voices say AI should be regulated, if not banned. He did not address the SEC’s aggressive actions on the cryptocurrency market. The recent release of GPT-4 highlights just how powerful AI tools have become, raising concerns on everything from job losses to automation to the extinction of humanity in the most dire scenarios. There is also a voice.
Gensler did not elaborate on how he believes AI applications will fit into the global financial system or what decisions they might influence. He also gave no estimate of how long it would take for the technology to spread.
Lack of regulation is dangerous for the global economy
In financial markets, AI is now embedded in trading programs like robo-advisors and stock market forecasting software, but it is also omniscient and omnipotent and disruptive to social order, as prevalent in the worlds of the movies Her and Megan. It’s not that similar to the AI that does it.
Still, Gensler warned that failing to regulate AI could “degrade the inherent network interconnectivity of the global financial system” and endanger the global economy. AI could play a central role in after-action reporting during future financial crises.
Gensler said risk management tools alone will not be enough to stop the risks advanced AI tools pose to the U.S. and global financial system. As the “new wave of data analytics” rises, existing solutions are becoming obsolete.
｜Editing: Rinan Hayashi
｜Original: SEC’s Gensler Says AI Could Play Big Role in Future Financial Crises