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SEC Chair Gary Gensler warns impending AI-wrought financial crisis ‘nearly unavoidable’

United States Securities and Exchange Commission Chair Gary Gensler has reportedly stated that with out some type of intervention, a financial crisis stemming from the widespread use of synthetic intelligence is “nearly unavoidable.” 

The chair’s feedback got here throughout an interview with the Financial Times the place, in accordance with the article, Gensler stated the crisis might come inside a decade.

The chair’s considerations evidently revolve across the centralization of AI fashions and cloud service suppliers.

Per the interview:

“I do think we will, in the future, have a financial crisis […] If everybody’s relying on a base model and the base model is sitting not at the broker dealer, but it’s sitting at one of the big tech companies. And how many cloud providers do we have in this country?”

Alongside cryptocurrency regulation, synthetic intelligence has grow to be one of many SEC’s best regulatory challenges. According to the Financial Times, Gensler is anxious about an overreliance on related fashions (e.g., ChatGPT) resulting in herd conduct on Wall Street and all through U.S. financial markets.

Related: Gary Gensler confirms SEC’s use of AI for financial surveillance

Gensler’s stance is nothing new. In 2020, Gensler co-authored a analysis paper titled “Deep Learning and Financial Stability,” whereby he professed an identical viewpoint, along with Lily Bailey, then an MIT analysis assistant however now working on the SEC as an assistant to the chief of workers, according to her LinkedIn web page.

Per the 2020 paper, the growing use of synthetic intelligence methods within the financial system “may lead to financial system fragility and economy-wide risks.”

The paper continues with an implicit name for presidency regulation, “existing financial sector regulatory regimes – built in an earlier era of data analytics technology – are likely to fall short in addressing the systemic risks posed by broad adoption of deep learning in finance.”

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