- The crypto crackdown may slow down in the near term.
- This is because the SEC is now more focused on AI regulation.
After more than two years of going after the cryptocurrency industry, Gary Gensler, the Chairman of the Securities and Exchange Commission (SEC) has turned his attention to a new technology that is currently causing a buzz globally. In a swift turn of events, Gensler has announced the agency’s plan to focus on Artificial Intelligence (AI).
Per a statement made by Wall Street’s top regulatory Chief at the National Press Club in Washington, unlike crypto and Non-fungible tokens (NFTs), AI deserves all the hype as it is the “most transformative technology of this generation.” Gensler added:
There’s a ‘there’ there—we can get to crypto later. We’re taking so much of what we humans do on a daily basis and automating it.
The SEC has not downplayed the risks associated with the crypto industry but it looks like XRP, Bitcoin (BTC) and Ethereum (ETH) may be off the spotlight for a while.
Compared to the numerous scams, fraud, breaches, and money laundering activities consistently plaguing the crypto ecosystem, Gensler believes that AI holds more significant financial risks for U.S. residents. One of the perceived threats from AI is mass automation. This could negatively impact on trillions of dollars worth of assets traded on SEC-monitored markets.
AI to Impact Global Financial Markets
While Gensler acknowledged that AI-generated investment recommendations may improve customer experience, especially for financial institutions, it could also be exploited to obscure accountability when there is an error or when a failure occurs. The SEC Chair sees the possibility of this technology destabilizing the global economy if more tech companies adopt its development for financial market applications.
Already, many market players are adopting the nascent technology and making predictions based on its performance.
Arthur Hayes, the Co-founder of BitMEX, highlighted that the growing demand for AI could boost Ethereum’s (ETH) price in the future. Trading platform Worldmarket also utilizes an AI-based trading system that helps their clients to invest without having to spend hundreds of hours searching for the right utility and potentially investible assets.
The commission is out to regulate the new big fish and as such, staff of the SEC have been mandated to come up with potential guidelines that address how AI can be utilized to benefit investors and other users. There is a perceived possibility that AI adoption may trigger ‘herding’ behavior where individuals will be coerced into making similar decisions as a result of receiving identical signals from a base model or data aggregator.
Contrary to the SEC’s plan, the BitMEX co-founder opines that the United States will not be able to exert control over AI seeing that there is no way to punish an AI. So far, China has introduced regulations on generative AI models like OpenAI’s ChatGPT and Alphabet’s Google Bard.
This is the first nation to introduce a comprehensive regulatory framework for AI chatbots. China’s legislation on AI is billed to be effective from August 15th.
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