The Chair of the U.S. Securities and Exchange Commission (SEC), Gary Gensler, recently underscored the significance of artificial intelligence (AI), characterizing it as “the most groundbreaking technology of our times.” He urged the necessity for readiness as it begins to leave an indelible imprint on global financial markets. While cryptocurrency continues to be an area of interest, Gensler’s focus is now primarily directed at the advancements and implications of AI, a technology he emphatically believes merits the buzz surrounding it.

Gensler, known for his unrelenting stance on the scams and fraudulent activities purportedly rife within the crypto industry, is currently directing his scrutiny toward AI. He perceives this technology as “the greatest transformation catalyst of this era”. As AI is increasingly automating various human operations within finance, Gensler points out the potential risks associated with such a trend if not properly regulated.

Technology and Its Impact on Market Risks
“An era of extensive automation can instigate ripple effects for the trillions of dollars of assets traded in markets under the SEC’s purview,” stated Gensler. He noted that, while AI’s predictive capabilities can aid firms in providing superior service to their clients, it could also potentially be misused to evade accountability when mishaps occur.

Gensler has been engaged with technology for quite a while, starting his exploration of AI in 1997, in the wake of the defeat of Russian chess grandmaster Garry Kasparov by IBM’s supercomputer, Deep Blue. Later, as a professor at MIT, Gensler delved deep into the research of AI, co-authoring a 2020 paper on the potential risks that deep learning could pose to the financial ecosystem.

Gensler is of the opinion that the existing regulatory structures are inadequate for managing these looming risks. He highlighted in his paper that synchronizing AI models across major trading entities could lead to increased market volatility and instability. As the head of the SEC, Gensler has frequently conversed about the potential benefits and drawbacks of new AI and machine-learning tools.

In July, Gensler proposed one of the pioneering regulatory frameworks for AI. It mandates trading houses and financial managers to assess whether their utilization of AI or predictive data could lead to conflicts of interest, especially concerning the delicate balance between client welfare and company profits.

The pivot toward AI does not suggest that the SEC is relinquishing its watchful stance on cryptocurrencies. Numerous legal cases involving significant crypto firms like Ripple, Binance, and Coinbase are still pending, indicating that the SEC, under Gensler’s stewardship, remains dedicated to pursuing its ongoing actions against crypto enterprises.