In an era where technological advancements are moving at a brisk pace, warnings have surfaced against the potential hazards posed by Artificial Intelligence (AI). High in the echelons of financial industry regulation is the chair of the Security and Exchange Commission (SEC), Gary Gensler, who has voiced concerns that big tech monopolization of AI applications to financial markets could significantly destabilize the global economy.
His apprehensions are centered around the perspective that AI may amplify financial fragility. Amid fears that individuals might base their decisions on similar signals received from a base model or a data aggregator, Gensler has cautioned that this could prompt ‘herding’. However, he did not elaborate on how AI might integrate into our international financial system or what decisions they could sway. Just as uncertain is his conjecture on the foreseeability of prevalent usage of this technology.
These viewpoints were aired during a time when AI innovation has seen a remarkable upswing, with certain quarters advocating for the technology to come under regulatory purview or even be outright prohibited. With the advent of increasingly potent AI utilities like Chat GPT 4, concerns have been raised about its implications such as job losses due to automation or, in the worst-case scenarios, the extinction of mankind.
At present, in financial markets, AI has been integrated into various platforms such as robo-advisors and stock market prediction software. These applications are quite far from the omnipresent, society-disrupting AI popularized in cinematography. Nonetheless, Gensler‘s cautionary stand is that failure to regulate AI could potentially exacerbate economic instability owed to global financial system’s inbuilt interconnectivity.
Adding weight to his fears, he mentioned that AI might feature prominently in a future financial crisis’s post-mortem analysis. Gensler further argued that existing risk management mechanisms cannot tackle the threats posed by advanced AI to the US and international financial systems. The current safeguards have been rendered obsolete confronted with the tide of new data analytics breakthroughs.
It’s in this light that regulators and industry stakeholders need to critically examine the role and impact of AI in the global financial system. The potential risks and rewards are vast, and it is crucial that a balance is struck between technological progression and sound financial governance.
Source: Coindesk
