The Chairman of the Securities and Exchange Commission (SEC) has issued a stark warning, stating that without further regulation, the increasing influence of artificial intelligence (AI) could lead to an inevitable financial crisis within the next decade.
In an interview with the Financial Times, SEC Chairman Gary Gensler acknowledged the immense challenge of addressing the impact of AI on financial stability. Current regulatory practices primarily focus on individual institutions, posing limitations in addressing the broader issues posed by AI.
Gensler highlighted the potential risk of a financial crisis resulting from various institutions relying on the same AI models and aggregated data. He predicted that this crisis may occur between the late 2020s and early 2030s due to the herd mentality and lack of diversity in decision-making.
Anticipating this future crisis, Gensler emphasized the need for action, stating, “In the aftermath, people will realize that there was either one data aggregator or one model we all relied on.”
Under Gensler’s leadership, the SEC has proposed a new rule in July aimed at restricting the use of AI by broker-dealers and investment advisers. The rule, however, has faced opposition from Republican lawmakers and industry groups who argue against the limitations it imposes.
Gensler acknowledged that while the proposed rule addresses certain concerns, it does not fully resolve the overarching issue of multiple institutions relying on the same AI models, which he believes could ultimately lead to a financial crisis.
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