SEC Chairman Gary Gensler says artificial intelligence could spark the next financial crisis

Release date: October 31, 2023 at 3:30 PM ET

Securities and Exchange Commission Chairman Gary Gensler has a lot to worry about as he seeks to bring order and fairness to America’s $100 trillion capital markets, and there are few issues that worry him more than the spread of artificial intelligence technology.

In an exclusive interview with MarketWatch, the regulator argued that AI-powered technologies within the ChatGPT framework have the potential to revolutionize the way we invest by using big data sets to predict things that were unthinkable even 10 years ago.

Securities and Exchange Commission Chairman Gary Gensler has a lot to worry about as he seeks to bring order and fairness to America’s $100 trillion capital markets, and there are few issues that worry him more than the spread of artificial intelligence technology.

In an exclusive interview with MarketWatch, the regulator argued that AI-powered technologies within the ChatGPT framework have the potential to revolutionize the way we invest by using big data sets to predict things that were unthinkable even 10 years ago, but that New powers can come with great risks.

A growing issue is that [AI] That could lead to a system-wide risk, Gensler said. As many financial players rely on one or only two or three models, in the middle you create a monoculture, you create a herd.

This herd effect can be dangerous if there is a flaw in the model that may reverberate during times of stress in the markets and cause sudden and unpredictable price changes in the markets. Gensler pointed to examples of cloud computing and search engines as markets for technology products that have quickly become dominated by one or two major players, and he said he worries about similar concentration in the AI ​​technology market.

The regulator said this is particularly difficult because of the fragmented nature of the US regulatory apparatus, which relies on the SEC to oversee securities markets while other agencies are responsible for banks or commodity markets.

It’s more of an interagency issue, Gensler said. This is the challenge for these new technologies.

As SEC chairman, Gensler stepped up his regulatory agency’s crackdown on the cryptocurrency industry in 2023 by filing lawsuits against Binance and Coinbase, the world’s two largest digital asset exchanges by trading volume. The Securities and Exchange Commission alleges that the two companies are trading unregistered securities in the United States, but the companies say they are not violating securities laws.

Gensler is simultaneously advancing the most fundamental market restructuring measures in a generation. Gensler is on MarketWatch’s list of the 50 most influential people in the markets.

But artificial intelligence is another issue where Gensler is starting to sound the alarm. It’s a bit ironic since the promise of AI has been largely responsible for the S&P 500’s SPX rally in 2023. The SEC chairman said his agency is currently considering new rules to regulate artificial intelligence. For example, the SEC proposed legislation this summer to address conflicts of interest associated with stockbrokers and investment advisers who use algorithms to predict and guide investor decisions through smartphone applications or web interfaces. do

The industry is pushing back against the proposal, arguing that existing rules are enough to prevent harm to investors and that a new rule would prevent brokers from using technology to create a better experience for clients.

Gensler said the SEC would benefit from such feedback, but still believes regulators need to be careful about the impact of these so-called predictive analytics tools. It would be fine if they did it to recommend a specific movie on a streaming app, he said. But if they do that to your donation, we need to address those conflicts.

#SEC #Chairman #Gary #Gensler #artificial #intelligence #spark #financial #crisis
Image Source : www.marketwatch.com

Leave a Comment