US Securities and Exchange Commission chair Gary Gensler is back with his finger-wagging. This time, it is directed at the artificial intelligence industry rather than crypto. Moreover, the finance regulator claims that centralized AI could be a threat to the financial system.
The latest warning from the “crypto cop on the beat” came at a virtual fireside chat hosted by Public Citizen on January 17.
Artificial Intelligence Threats
He said that centralized artificial intelligence markets with just a handful of models could lead to a fragile financial system. This could arise if financial actors rely too heavily on them for financial data.
Gensler compared the rise of AI to cloud services and search providers. In the US, there are 3 main players that dominate this sector — Amazon, Microsoft, and Google.
Top cloud services market shares. Source: Statista
“I believe it is likely inevitable that we will have, measured on the fingers of one hand, if not two or three, large base models, and separately the data aggregators.”
He added that this scenario would create a “monoculture,” where hundreds or thousands of financial actors may rely on a central data or central AI model.
Gensler also said that regulators have no oversight of artificial intelligence models that will play a key role in the financial sector. The comments are a hint that Gensler is angling for his agency to regulate AI, just like crypto.
Read more: The 6 Hottest Artificial Intelligence (AI) Jobs in 2024
He said the ‘central nodes’ that the whole financial sector is likely reliant on are not currently regulated.
“And if those nodes have it wrong, the monoculture goes one way, well, then there’s a risk in this society and the financial sector at large.”
US regulators must ensure there is a “diversity of models and diversity of data sources,” otherwise “you end up with a pretty fragile system,” he added.
Gary Genlser has said similar things about the crypto industry, labeling it as a “wild west” threatening traditional finance. In September, he warned about financial advisors using AI, and in August, he said AI could destabilize financial markets through deep learning.
AI Latest News
The artificial intelligence sector is currently dominated by just a handful of players, including OpenAI, Microsoft, Google, and Anthropic.
This week, Google Deepmind said that its new AI system has made a major breakthrough in one of the most difficult tests, high-level geometry problems.
So far, most of the focus has been on large language models, but mathematical-based AIs are being developed. These are likely to be the ones that get Gary Gensler and his TradFi buddies all riled up.
Moreover, AI has been a central focus at the World Economic Forum in Davos this week. The WEF has also reported on the risks of AI and its role in creating misinformation and disinformation.
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