SEC’s Gensler Wants to Use AI for Enforcement Against Crypto
Gensler, thinks more AI use would be advantageous for the agency's workforce | Credit: Shutterstock
- Concerns concerning generative AI’s potential effects on financial markets have been raised by the SEC
- According Gary Gensler, developments in generative AI raise the prospect that institutions would make decisions using the same sample of data
- Gensler claimed that due to the high demand for data and computing capacity, a small number of tech platforms may come to dominate the market
The chairman of the Securities and Exchange Commission (SEC), Gary Gensler, emphasized market surveillance and other scenarios where agency personnel could gain from utilizing AI more frequently.
Concerned That Chatbots Might Trigger a Market Panic
Gensler outlined several potential use cases for AI that may help the regulator in its capacity as securities watchdog during a lecture on July 17 before the National Press Club, when he later broke his silence over the recent Ripple court ruling.
He said, “We at the SEC could also benefit from staff using more artificial intelligence in their market surveillance, disclosure review, exams, enforcement, and economic analysis.”
Between 2018 and the first half of 2023, the SEC took enforcement actions against at least 54 cryptocurrency enterprises. These actions dramatically increased in frequency after FTX collapsed in November.
The SEC chair praised the technology and the advantageous effects it can have on humans and the financial markets, even if Gensler did not go into further detail on how the agency might deploy AI:
“AI opens up tremendous opportunities for humanity, from healthcare to science to finance. As machines take on pattern recognition, particularly when done at scale, this can create great efficiencies across the economy,” he said, adding that he believes it’s the most transformative technology of our time, on par with the internet and mass production of automobiles.
AI Still Has Problems
Although the general consensus is good, Gensler emphasized that many AI systems are biased and deceptive, violate privacy rights, and create some conflicts of interest.
Regarding bias, Gensler claimed that some predictive AI models incorporate historical biases, which reduces system accuracy and, in some situations, results in a completely erroneous prediction.
When a bogus AI-generated text of his resignation started making the rounds online, Gensler emphasized that he had even been the victim of misinformation.
Gensler continued by saying that when AI systems are educated to prioritize business objectives over customer interests, conflicts of interest may result.
He said: “That’s why I’ve asked SEC staff to make recommendations for rule proposals for the commission’s consideration regarding how best to address such potential conflicts across the range of investor interactions.”
Additionally, he thinks that creating a few AI monopolies could destabilize the economy and possibly contribute to a “future financial crisis.”
On July 17, Gensler gave a follow-up interview to Yahoo Finance and stated that the regulator will take enforcement action against those responsible for defrauding investors using AI:
“Fraud, fraud, fraud. We are both authorized and required by Congress to pursue bad actors who try to deceive the public using artificial intelligence,” he said.
