SEC Chief Gary Gensler has issued a warning about the potential impact of artificial intelligence (AI) on global markets. Speaking at the National Press Club, Gensler highlighted the risk of widespread panic if AI systems generate similar signals that lead investors to make the same decisions. This could exacerbate the interconnectedness of the global financial system. Gensler stressed the importance of understanding the potential impact of AI to mitigate risks and prevent disasters like the 2008 financial crisis.
In his speech, Gensler identified five key issues related to AI that the SEC is focusing on. The first is financial stability. Gensler cited a research paper he co-authored called “Deep Learning and Financial Stability,” which suggests that a few dominant AI platforms could lead to poor investment decisions if they malfunction, potentially causing a financial disaster. He drew parallels to the 2008 crisis, which originated from excessive lending by banks in the United States.
Another concern raised by Gensler is the impact of AI on privacy and intellectual property. He acknowledged that AI models collect sensitive data from users, and the ownership of this data is a subject of debate. Gensler also raised the issue of “rent extractions,” highlighting how AI-powered systems could prioritize the interests of producers over consumer welfare. For example, financial advisers could optimize investment systems to prioritize their own interests, potentially endangering investor finances.
Deception enabled by AI was also discussed by Gensler, who shared a personal experience of encountering AI-generated rumors about his resignation. He stressed the need to address online misinformation and fraud facilitated by AI, noting that fraud is a violation of securities law and the SEC is committed to protecting investors and the markets.
Finally, Gensler emphasized the challenges related to the explainability and bias of AI systems. The complexity of AI models makes it difficult for most people to understand how they analyze information. Gensler warned that AI systems may have latent biases that affect their predictions and influence human actions.
In conclusion, Gensler highlighted the potential risks associated with AI and its increasing influence on global markets. The SEC is actively studying these risks and working to protect consumer interests and the global economy. Gensler called on individuals to educate themselves about AI and its effects to contribute to risk mitigation efforts.