Gary Gensler, the chair of the Securities and Exchange Commission (SEC), has warned that artificial intelligence (AI) could trigger a financial crisis within the next decade. Gensler told the Financial Times that he believes “it’s nearly unavoidable” that AI will cause a market crash, and that reliance on models developed by tech companies could lead to economic chaos.
Gensler’s concerns stem from the fact that AI models are often complex and opaque, making it difficult to understand how they work and what risks they pose. In addition, he worries that banks are becoming too reliant on AI, and that a failure in one model could have a cascading effect on the entire financial system.
Gensler called for AI regulation that addresses both the underlying AI models built by tech companies and how they are used by Wall Street banks. He described this as a “cross-regulatory challenge,” as it will require coordination between different government agencies.
Wall Street banks have been enthusiastic adopters of AI, and have been experimenting with a variety of new technologies. However, some banks have also cracked down on the use of AI, citing concerns about risk. For example, Goldman Sachs, Deutsche Bank, and Bank of America all banned employees from using the ChatGPT chatbot at work earlier this year.
There are a number of potential risks associated with the use of AI in the financial sector. One concern is that AI models could be used to manipulate markets or to commit fraud. Another concern is that AI models could make mistakes, which could lead to significant financial losses. Additionally, the use of AI could lead to job losses in the financial sector, as AI-powered systems become capable of performing tasks that are currently done by humans.
The sources for this piece include an article in BusinessInsider.