“AI may heighten financial fragility,” Gensler said at the National Press Club in Washington.

Gary Gensler, Chairman of the U.S. Securities and Exchange Commission (SEC), has expressed concerns about the potential role of artificial intelligence (AI) in future financial crises. He believes that AI could increase financial instability by promoting herding behavior, where individuals make similar decisions based on signals from a common AI model or data aggregator.

Gensler has requested recommendations from the SEC staff on regulations to address the optimization of AI for intermediaries at the expense of investors. He warns that conflicts of interest may arise if advisors or brokers prioritize their own interests over those of investors. (CoinDesk)

While Gensler did not provide specific details on how AI applications could affect the global financial system or predict their widespread use, he emphasized the need to regulate AI to prevent exacerbation of risks in the interconnected financial system.

He suggested that AI may play a significant role in post-crisis analysis. Gensler also highlighted that existing risk management tools are insufficient to address the risks posed by advanced AI tools, and current guardrails are outdated in the face of new breakthroughs in data analytics.

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