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Regulators gotta act fast, man! The chair of the US Securities and Exchange Commission is sounding the alarm about the risks that artificial intelligence poses to financial stability. Gary Gensler, that’s the dude’s name, he told the Financial Times that if we don’t intervene quickly, we’re headed for a major financial crisis in like, ten years tops.
Now, here’s the thing. Figuring out how to regulate AI is gonna be a real tough nut to crack for these US regulators, according to Gensler. The risks go beyond just the financial markets, man. We’re talking about models designed by these tech companies that aren’t even under the watch of Wall Street watchdogs. It’s a horizontal matter, you know what I’m saying? Multiple institutions relying on the same base model or data aggregator.
The SEC proposed a rule to deal with potential conflicts of interest in predictive data analytics, but it’s focused on individual models used by broker dealers and investment advisers. But even if they update these measures, it’s not gonna solve the horizontal issue, man. ‘Cause what if everyone’s relying on a base model that’s sitting with one of these big tech companies? And how many cloud providers do we even have in this country? Woah.
Gensler’s trying to get everyone on board to tackle this challenge. He’s taken it to the Financial Stability Board and the Financial Stability Oversight Council, ’cause he knows it’s gonna take some cross-regulatory action to sort this mess out.
Regulators all over the world are grappling with this AI policing business. The EU is way ahead, man. They’ve drafted some tough laws to regulate AI, and they’re getting ready to approve them by the end of the year. But the US is still figuring out what needs to be regulated and what’s covered by existing laws.
Now, Wall Street’s no stranger to AI. They’ve been using it for robo advising, account openings, and brokerage apps, you name it. But here’s the catch. Gensler’s worried that if everyone’s making decisions based on the same data model, we’re gonna see some herd behavior that could seriously mess up financial stability and unleash the next crisis. Yikes.
He’s convinced that we’re heading straight for a financial crisis, man. And it’s all because of AI’s powerful “economics of networks.” According to Gensler, it’s nearly unavoidable, and he’s predicting it could hit us as early as the late 2020s or early 2030s. That’s not too far away, man!
The folks in Washington are all over AI, too. They’ve got concerns about market stability, data protection, and antitrust. The Federal Trade Commission launched a review of this company called OpenAI, checking if they’re causing any harm to consumers or jeopardizing data security. And the antitrust agencies, man, they’re warning about how AI’s dependence on scale could lead to these tech monopolies. Not cool, dudes.
And get this, Gensler’s thinking AI could cause some competition issues in capital markets, too. He’s worried about market concentration and asking if this AI stuff might lead to more market makers being in control. That’s a serious concern, man.
But that’s not all, he’s got more on his plate. The SEC is working on this rule that’ll make public companies disclose their emissions, man. They gotta spill the beans on their direct emissions and the emissions they get from the energy they’re using. It’s all about being transparent and helping us understand their climate impact, you know?
Now, Gensler didn’t wanna talk specifics, but he’s gonna do what’s right for the American public. It’s all about following the law and making sure the courts are cool with it. He did mention that over half of the companies in the Russell 1000 have already started disclosing their emissions. So, he’s got his eye on that climate proposal, for sure.
But here’s the thing, man. Some Republican lawmakers and attorneys-general are pretty ticked off about this whole thing. They’re threatening to sue the SEC, saying they’re overstepping their authority. But Gensler ain’t backing down, man. He’s got a lot on his plate, dealing with legal challenges left and right.
So, there you have it, dudes. AI’s got regulators sweating, trying to avoid a major financial crisis. We’re talking about some intense challenges, but Gensler’s on it, man. Let’s hope they figure this stuff out before it’s too late. Stay tuned for more updates. Peace out.