Tech euphoria comes in waves, and even though its focal point is constantly shifting (from crypto to the metaverse to AI now), some things, like its detractors, never change. Despite being the SEC Chair Gary Gensler’s number one target in the cryptocurrency sector for a number of years, he is now giving his fairly scathing opinion on artificial intelligence, Silicon Valley’s newest hot commodity.
Gensler warned the audience during a speech at the National Press Club conference on Monday that “AI may heighten financial fragility.” He made a few very staid remarks that we’ve all heard before, such as how AI is the most revolutionary invention since the printing press. He said, though, that his organization was striving to develop new legislation that might prevent AI from mistreating investors.
According to Gensler, AI might be heavily included in the analysis of a future financial catastrophe.
The largest problem, according to him, was that a small number of the “base-layer generative AI models” may be providing all of the “downstream actors,” or all of the retail investors, venture capital firms, advisors, and so on, with the same financial data and advice. The entire economy would be at risk if, for example, everyone placed large bets on the housing market, which later tanked because everyone was basing their decisions on the same mortgage data, he claimed, creating a “monoculture” of economics as a result.
He claimed that regulations might be based on both specific models and AI as a whole, but that only addressed the investor side of the problem. Next is the misuse of generative AI by malicious actors for widespread deceit. The SEC chief spoke about how a piece of artificial intelligence (AI)-generated text from a fake Twitter account spread the rumor that he had resigned. Gensler also expressed his worries that, because ads can now be tailored to the individual based on customized AI algorithms, AI is simply the next great weapon for entangling naive people in the next big financial fraud scheme.
Fraudsters now have a new tool to use due to AI… Although it was the same spam, we all used to receive it, he claimed. At this point, messages can be customized.
Gensler ought to be aware of financial con artists. His agency has pursued some of the largest, most persistent cryptocurrency firms, including Binance and Coinbase. The SEC has also brought civil lawsuits against those who are accused of engaging in cryptocurrency-based fraud, including Celsius co-founder Alex Mashinsky and the shaggy-haired former CEO of FTX Sam Bankman-Fried.
As opposed to a large language model-based AI chatbot like ChatGPT, Gensler claimed that pattern recognition and its capacity to make predictions about people—AKA the increasingly complex models used to directly advertise and sell products to customers—represent the biggest use case for AI in terms of making money. Gensler also show these models may be used by insurance companies to decide who would gain access to medical treatment based on who is more likely to live. As if targeted advertising weren’t already the evil side of machine learning algorithms.
Additionally, he expressed his worries that the algorithms themselves might just be a reflection of racial biases brought on by flawed training data. The employment of AI in financial advise, according to him, must be in the best interest of clients and retail investors, not… place the AI model’s interest ahead of the investors, he stated.
Although the SEC has always been seen as the primary opponent by cryptocurrency enthusiasts, it took some time before the agency’s chairman truly earned the reputation of Thanos among fintech tans. Although Gensler was at first “intrigued” by the potential for good in blockchain technology, he soon came to see cryptocurrency as unimportant, declaring that “We don’t need more digital currency.
As the hype cycle wears off and the well-known limitations of present AI become even more obvious, perhaps Gensler’s opinion on AI will deteriorate even further over time. As with cryptocurrency, though, we’ll probably have to wait until the next major security flaw deprives investors of millions of dollars in hard-earned cash before regulators actually decide to restrict this technology.
