Securities and Exchange Commission (SEC) Chair Gary Gensler discussed the evolving challenges of regulating artificial intelligence in finance and the cryptocurrency market in a recent interview. He emphasized the transformative nature of AI, comparing its impact to that of the internet and the electrification of the early 20th century.
Gensler highlighted the SEC’s focus on ensuring AI algorithms used by financial firms prioritize the public’s interests. He expressed concern about potential systemic risks arising from the increasing reliance on a few dominant AI models. Using the film “Her” as an analogy, he illustrated the potential consequences of widespread dependence on these models, suggesting a market crash could occur if these systems malfunction or are manipulated. He called for global regulatory cooperation to address this emerging challenge.
SEC Chairman Gary Gensler Insists on Regulating Cryptocurrencies Through Enforcement
Regarding cryptocurrency regulation, Gensler reiterated his stance that blockchain technology is not inherently incompatible with securities laws. He stressed the importance of investor protection, disclosure, and conflict mitigation in the crypto market. He pointed to the numerous instances of investor losses in the crypto space, attributing them to a lack of transparency and prevalent conflicts of interest. He reaffirmed the SEC’s commitment to enforcing existing securities laws in this sector.
Addressing the SEC’s ongoing legal battles, particularly in the Fifth Circuit Court of Appeals, Gensler stated that the agency operates within the bounds of the law and adjusts its approach based on court interpretations. He highlighted the SEC’s focus on reducing costs and risks in various markets, including equity and Treasury markets, through initiatives like equity market reform.
Responding to criticism about the SEC’s reliance on enforcement actions in the crypto space, Gensler defended the agency’s approach, emphasizing the importance of robust laws and regulations. He reiterated the need for disclosure to protect investors and maintain trust in the capital markets, drawing parallels to the market conditions of the 1920s.
Gensler declined to comment on former President Trump’s plans to launch a crypto platform, stating that the SEC does not comment on specific projects. He did, however, address the growing trend of private credit firms packaging private market assets into retail-friendly products like ETFs. While acknowledging the potential benefits of competition in this area, he also cautioned about the untested nature of these products in a market downturn and highlighted the SEC’s scrutiny of the intersection of private credit with the insurance and banking sectors.
Looking ahead to the remainder of his term, which is currently set to expire in June 2026, Gensler emphasized his commitment to serving the investing public.
