SEC chairman: AI could cause FINANCIAL CRISIS in the next decade if left unregulated
By oliviacook // 2023-10-24
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Securities and Exchange Commission (SEC) Chairman Gary Gensler has warned that rapidly advancing artificial intelligence (AI) could cause a financial crisis that is "nearly unavoidable" in the next decade if left unregulated. According to the SEC chairman, the lack of diversity in AI technologies used by multiple institutions could one day pose a significant threat to U.S. financial stability. He predicted during an interview with the Financial Times that this AI-fueled crisis could occur in the late 2020s or early 2030s. "I do think we will, in the future, have a financial crisis," the SEC head warned. "Maybe it's in the mortgage market, maybe it's in some sector of the equity market. And in the after-action reports, people will say 'Aha, there was either one data aggregator or one model we've relied on.'" While Gensler acknowledged the necessity of regulating AI, he nevertheless admitted that doing so is a "hard challenge." He continued: "It's a hard financial stability issue to address because most of our regulation is about individual institutions, individual banks, individual money market funds, individual brokers. It's just in the nature of what we do.

Gensler urges regulators to "tame AI"

Several areas identified by the SEC chair where AI could potentially destabilize the financial system are as follows: Gensler has urged regulators to take proactive measures to mitigate the potential threats AI poses to financial stability and rein its use. Seeking to rein in the use of AI, the SEC proposed new rules that would require broker-dealers and investment advisers to:
  • Evaluate whether using certain AI technologies (i.e., predictive analytics and similar technologies) in investor interactions involves a conflict of interest in a way that puts the firms' interests above those of investors.
  • Address "conflicts of interest" issues arising from their individual use of predictive analytics by employing tools believed to address these risks that are specific to the particular AI technology they use.
  • Eliminate or neutralize the effect of any such conflicts.
  • Have written policies and procedures to achieve compliance with the proposed rules.
  • Keep books and records related to these requirements.
However, Gensler told the Financial Times that the proposed rule does not solve the "horizontal issue." While various open-source AI technologies exist, most entities currently rely on a small number of tools and base their decisions on the same underlying base models or underlying data aggregator models developed by a group of players, such as Open AI's ChatGPT, which could "lead to herd mentality and undermine financial stability." Visit FutureTech.news for more stories about the dangers of AI. Watch this video about SEC Chairman Gary Gensler's warning about AI being responsible for the next financial crisis. This video is from the Daily Videos channel on Brighteon.com.

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