SEC Chair Gensler Warns AI Could Trigger the Next Financial Crisis

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Crypto’s Biggest Federal Villain Says AI Could Help Cause the Next Big Financial Crisis


In the ever-evolving landscape of technology, the focus often shifts from one cutting-edge innovation to another. We have witnessed the rise of cryptocurrencies, the metaverse, and now the widespread adoption of artificial intelligence (AI).

While tech enthusiasts and businesses are eager to embrace AI’s potential, there are always skeptics and critics in the mix. One prominent figure in the finance world who has been a consistent critic of emerging technologies is SEC Chair Gary Gensler. After being the crypto community’s arch-nemesis, he has now turned his attention to AI, warning about its potential to cause significant financial instability. In this article, we will delve into Gensler’s concerns and explore the implications of AI’s role in shaping the future financial landscape.

Gensler’s Stance on AI and Financial Fragility

Speaking at the National Press Club conference, Gary Gensler expressed his apprehension about the impact of AI on financial markets. He boldly asserted that AI might heighten financial fragility, comparing its transformative power to that of the printing press. While acknowledging its potential benefits, he stressed the urgent need for new regulations to prevent AI from being abused by bad actors and causing a future financial crisis.

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The Perils of Monoculture in Finance

Gensler’s primary concern revolves around the emergence of a “monoculture” of economics, driven by a limited number of base-layer generative AI models. These models could become the primary source of financial information and advice for retail investors, venture capitalists, advisors, and others. If a substantial portion of the financial ecosystem relies on these AI models, a collective decision based on the same data could lead to disastrous consequences. For instance, if the AI models advocate significant investments in the housing market, and it crashes due to collective actions, the entire economy could be at risk.

AI as a Tool for Mass Deception

Beyond financial fragility, Gensler highlighted the potential for AI to be exploited by malicious entities for mass deception. He cited an example of an AI-generated tweet from a bot account that falsely claimed his resignation from office. This highlights the risk of AI being used to spread misinformation and manipulate financial markets. Moreover, personalized AI algorithms can be leveraged by fraudsters to create tailored campaigns that prey on individual vulnerabilities, making fraud more insidious and difficult to detect.

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Concerns About Bias and Fairness

Another critical issue raised by Gensler is the potential for AI algorithms to perpetuate racial biases due to flawed training data. AI models that offer financial advice must prioritize the best interests of clients and retail investors rather than serving the AI model’s interests. Gensler’s concerns highlight the need for thorough scrutiny of AI algorithms to ensure they do not propagate harmful biases.

Gensler’s Stand Against Crypto

Before becoming an outspoken critic of AI, Gensler already had a contentious history with the crypto community. He had gone after major cryptocurrency companies like Binance and Coinbase, filing civil complaints against alleged perpetrators of crypto-based fraud. While initially intrigued by blockchain technology’s potential, he ultimately dismissed the need for more digital currencies, earning him the reputation of being the crypto community’s ultimate antagonist.


As the hype around AI continues to grow, it is essential to heed Gary Gensler’s warnings about its potential risks. While AI offers immense potential for transforming various industries, including finance, it also poses unique challenges that require careful regulation.

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To prevent a future financial crisis and safeguard against fraudulent activities, regulators must develop comprehensive guidelines that address the concerns raised by Gensler. By doing so, we can harness the full potential of AI while ensuring a stable and fair financial ecosystem for all.