US Securities and Exchange Commission Chairman Gary Gensler has reportedly stated that a financial crisis caused by the widespread use of artificial intelligence is “almost inevitable” without some form of intervention.
The chairman’s comments came during an interview with the Financial Times, in which Gensler said the crisis could happen within a decade, according to the article.
The chair’s concerns apparently revolve around the centralization of AI models and cloud service providers.
According to the interview:
“I do believe that we will have a financial crisis in the future […] When everyone relies on a base model and the base model is not at the broker-dealer but at one of the big technology companies. And how many cloud providers do we have in this country?”
Along with cryptocurrency regulation, artificial intelligence has become one of the SEC’s biggest regulatory challenges. According to the Financial Times, Gensler is concerned about an over-reliance on similar models (e.g. ChatGPT) that is leading to herd behavior on Wall Street and throughout the US 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 research paper called “Deep Learning and Financial Stability,” in which he made a similar point with Lily Bailey, then a research assistant at MIT but now an assistant to the chief at the SEC, according to her LinkedIn page.
According to the 2020 paper, the increasing use of artificial intelligence systems in the financial system “may lead to financial system fragility and macroeconomic risks.”
The paper continues with an implicit call for government regulation: “Existing financial sector regulatory systems, built in an earlier era of data analytics technology, are unlikely to be able to address the systemic risks posed by the widespread adoption of Deep Learning in finance emerges.”