SEC Chair Says AI Could Cause the Next Big Financial Crisis

Tech hype comes in waves, and while the focus keeps changing (first crypto, then metaverse, and now AI), some things — like the tech’s critics — remain the same. SEC Chairman Gary Gensler was the crypto community’s #1 public enemy. 1 for a few years, but now he’s offering his somewhat caustic assessment Silicon Valley’s newest heartthrob: artificial intelligence.

during one speak At Monday’s National Press Club conference, Gensler told the crowd that “AI could amplify financial fragility.” He made some rather staid comments we’ve heard many times before — that AI is the most transformative technology since the printing press — and stuff further. But he also said his agency is working on making suggestions new regulations This could shut down AI’s potential to abuse investors.

“AI could play a central role in the aftermath of a future financial crisis,” Gensler said.

The biggest problem, he said, is that all the “downstream players” — all retail investors, venture capital firms, advisors, etc. — can all get the same financial information and advice from very few base layers generative AI models. This, he said, would create a “monoculture” of the economy, endangering the entire economy if, say, everyone puts great emphasis on it real estate marketwhich then goes down because all of their decisions were based on the same mortgage data.

Regulations could be based on individual models as well as AI as a whole, he said, but that’s just the investors’ side. Next is how bad actors can abuse generative AI for mass deception. The SEC chief mentioned what a piece of AI-generated text was like in his speech From a bot Twitter account, he spread the rumor that he had resigned from his position. Gensler also expressed concern that AI is just the next big tool to implicate naïve people in the next big financial fraud scheme, since campaigns can now be tailored to individuals based on personalized AI algorithms.

“With AI, scammers have a new tool to exploit. We all used to get spam, but it was still the same spam,” he said. “Now the communication can be individualized.”

Gensler should know about financial scammers. His agency has catered to some of the largest crypto companies in existence binance And Coinbase. The SEC has also filed civil lawsuits against the alleged perpetrators of crypto-based fraud, such as: Celsius co-founder Alex Mashinsky And Fuzzy-haired ex-FTX CEO Sam Bankman-Fried.

Rather than an AI chatbot based on large language models like ChatGPT, Gensler says the biggest use case for AI in making money is in pattern recognition and its ability to make predictions about individuals Increasingly sophisticated direct mail models And Sell ​​products to customers. If targeted advertising weren’t already the downside of machine learning algorithms, Gensler also mentioned how these models could be used by insurance companies to determine who might be able to access medical treatment based on their higher likelihood of surviving.

He also shared his concern that the algorithms themselves could easily do this reflect racial bias resulting from flawed training data. He said that AI models used to provide financial advice “must be in the best interests of clients and individual investors and must not … put the interests of the AI ​​model ahead of investors.”

Though crypto bros have viewed the SEC as their main adversary for years, it took some time for the agency’s chairman to become fully the Thanos-like figure of the fintech tan. Although Gensler was initially “fascinated” by the nature of blockchain infrastructure as a “powerful force for good,” he eventually came to view cryptocurrencies as irrelevant. saying “We I no longer need digital currency.”

Maybe it will change Gensler’s opinion on AI It will only get worse over time as the hype cycle wears off and the known limitations of current AI become even more apparent. But as with crypto, we’ll likely have to wait until the next big exploit robs investors of millions of hard-earned dollars before regulators really decide to restrict this technology.

Want to learn more about AI, chatbots, and the future of machine learning? Check out our full coverage artificial intelligenceor browse our guides The best free AI art generators, The Best ChatGPT Alternatives, And Everything we know about OpenAI’s ChatGPT.

Zack Zwiezen

Zack Zwiezen is a USTimesPost U.S. News Reporter based in London. His focus is on U.S. politics and the environment. He has covered climate change extensively, as well as healthcare and crime. Zack Zwiezen joined USTimesPost in 2023 from the Daily Express and previously worked for Chemist and Druggist and the Jewish Chronicle. He is a graduate of Cambridge University. Languages: English. You can get in touch with me by emailing

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