Gensler: AI’s role in finance and Crypto raises Regulatory needs

SEC Chair Gary Gensler has expressed significant concerns regarding the growing role of artificial intelligence (AI) in financial markets and its implications for the cryptocurrency industry.

In a recent interview with Bloomberg,  Gensler emphasized the transformative nature of AI in the financial sector, comparing it to historical innovations like the Internet and electrification. 

He stated, “The use of artificial intelligence… has taken on… an important transformative part of our economy… probably more transformative than 100 years ago when we electrified so many things in our markets.”

He expressed concerns about potential systemic risks, noting that reliance on a few large cloud providers and AI models could lead to future financial crises.

Gensler discussed the ongoing regulatory efforts regarding cryptocurrencies, asserting that there is nothing inherently incompatible between decentralized ledger technology and existing securities laws. He remarked, “If a market’s ever going to have trust, it also needs to come into compliance.”

Additionally, he underscored the importance of transparency and investor protection in the rapidly evolving crypto space.

In light of recent litigation, especially from business-friendly courts, Gensler stated, “We do everything we do within the law and how the courts interpret the law, if the courts interpret it differently, we adjust.” He emphasized the SEC’s commitment to protecting investors while fostering a competitive market environment.

Gensler acknowledged the growing role of private credit firms and the complexity of regulating this space. He said, “I think that competition is good for borrowers, investors, savers. But it still has to comply with the basic tenants of risk management, disclosure, transparency, and the like.”

He cautioned that the private credit market has yet to be tested during a downturn, highlighting the need for careful oversight.

Gensler’s statements reflect a commitment to evolving regulatory frameworks to address the challenges posed by new technologies and financial products, emphasizing the need for investor protection and market integrity.