AI and Crypto Under Siege? Gary Gensler Reveals His Master Plan
In a recent interview, SEC Chair Gary Gensler discussed his plans to bring order to the crypto industry. It turns out that the SECās regulatory ambitions now extend to the realm of artificial intelligence as well.
Gensler is convinced that the growing influence of AI in the financial sector highlights the need for regulationāwith his leadership at the forefront.
Read more: Gary Gensler: The Antihero of Our Time
AI in Finance and Potential Risks
Gary Gensler has highlighted that AI is becoming an increasingly transformative force in the economy, particularly in the financial sector. He compared its impact to earlier technological breakthroughs such as electrification or the rise of the internet.
In the context of brokerage apps and investment advisory services, AI is used to enhance user experience, much like movie recommendation algorithms predict viewer preferences, Gensler explains.
One of the SECās primary tasks is to ensure that AI algorithms used by financial service providers are designed to benefit the customer, rather than serving only the interests of the providers themselves.
According to Gensler, this is about protecting investors and ensuring fairness, both of which are core responsibilities of the SEC.
In addition to potential conflicts of interest between financial service providers and their clients, Gensler is raising alarms about systemic risks linked to the monopolistic power of a few large cloud providers that support AI models used in the financial sector.
He warned that the financial system could face serious issues if these AI models, heavily relied upon by financial institutions, were to fail or malfunction.
Read more: The 5 Best Movies About AI
Challenges of Regulating AI
Gensler acknowledged that regulating AI is a global issue, requiring cooperation among international regulators.
He admitted that developing rules to protect against the systemic risks stemming from the financial sectorās growing reliance on AI is no simple task. The interconnectedness and concentration of AI models create an even more complex regulatory environment.
Another concern Gensler mentioned regarding global AI regulation in finance is the risk of bad actors using AI to deceive users.
Das warned about the dangers of monopolization in the AI technology provider market, the heightened risks of large-scale failures, cyber threats, and data leaks. He also voiced concerns about the āopacityā of AI models, which complicates auditing AI-driven decisions in the banking sector.
Even before that, the European Central Bank raised warnings about AIās potential impact on financial stability. It appears that a consensus is forming among global banking elites on the need for increased regulation of AI technologies in the financial sector.
Crypto Regulation: Emphasis on Disclosure
Part of Gary Gensler's interview was dedicated toā¦ offering congratulations! However, the SEC Chair seemed to be somewhat ironic.
He stated there is nothing inherently incompatible between blockchain technology and current securities laws, referring to the core principles that have guided the SEC for decades.
Read more: SEC Criticized for Security Breach
Gensler emphasized that the SECās role is to ensure investors have access to all the information they need to make informed decisions, while also protecting them from fraud and conflicts of interest.
However, itās worth noting that the demand for transparency can work both ways.
For example, earlier this year, cryptocurrency exchange Coinbase filed lawsuits against the SEC and the Federal Deposit Insurance Corporation (FDIC), claiming that these agencies were ignoring Freedom of Information Act (FOIA) requests.
Coinbase had been calling for transparency and requested documents from the SEC related to several closed investigations, including whether ETH is classified as a security.Ironically, Genslerāwho often advocates for transparencyādenied the request.
One thingās for sureāno one can accuse Gary Gensler of inconsistency.
Enforcement and the Legal Framework
The SEC is frequently criticized for its enforcement-driven approach to applying existing securities laws, despite resistance from the crypto industry and some lawmakers.
When asked about this directly, Gary Gensler responded that the agency has always actedāand will continue to actāwithin the legal framework established by Congress.
He stated that the SEC will continue to enforce these laws as they are written and, if necessary, adjust its actions based on court interpretations.
Meanwhile, Gensler proudly pointed out that the SECās approach to regulating cryptocurrencies hasnāt changed significantly over the decades. In his view, there is no need for change.
Gensler continuously emphasizes that current securities laws, when followed, provide a reliable foundation for investor protection.
This is what the SEC is doing, he insists, whether itās overseeing stock markets valued at $50ā60 trillion, treasury markets nearing $30 trillion, or bond and fixed-income markets.
In fact, based on his sharp tone, one might even suspect that Gensler is considering tougher regulations for the cryptocurrency sector.
Gensler and Trump: No Comment
Gary Genslerās repeated emphasis on the importance of transparency backfired toward the end of the interview.
Following this, Gensler was asked about his thoughts on World Liberty Financial, a new crypto platform being developed by Donald Trump and his sons.
However, the sale of WLFI will be regulated by the SEC, meaning only accredited investors will be eligible to purchase the tokens.
2026: Whatās Next?
Gary Genslerās term as SEC Chair is set to end in 2026.
When asked how he feels about that approaching date, Gensler unexpectedly shifted the conversation to his family.
He didnāt hire a nanny and never remarried. This offers a rare personal glimpse into Gensler, who is usually known for his rigorous, detail-oriented approach.
Butā¦
Read more: Gary Gensler: The Antihero of Our Time
AI in Finance and Potential Risks
Gary Gensler has highlighted that AI is becoming an increasingly transformative force in the economy, particularly in the financial sector. He compared its impact to earlier technological breakthroughs such as electrification or the rise of the internet.
In the context of brokerage apps and investment advisory services, AI is used to enhance user experience, much like movie recommendation algorithms predict viewer preferences, Gensler explains.
Gary Gensler Warns of AI Risks. Source: Fortune
While AI offers many advantages, it also presents risks that need to be addressed through regulation.
One of the SECās primary tasks is to ensure that AI algorithms used by financial service providers are designed to benefit the customer, rather than serving only the interests of the providers themselves.
According to Gensler, this is about protecting investors and ensuring fairness, both of which are core responsibilities of the SEC.
In addition to potential conflicts of interest between financial service providers and their clients, Gensler is raising alarms about systemic risks linked to the monopolistic power of a few large cloud providers that support AI models used in the financial sector.
He warned that the financial system could face serious issues if these AI models, heavily relied upon by financial institutions, were to fail or malfunction.
It is not only possible but likely that some financial crisis in the future will happen because everybody is relying on the same AI models. If those models fail, the entire financial system could go off a cliff,Gensler warned.
Drawing an analogy to the film Her, Gensler suggested that just as emotional chaos ensued when AI shut down in the movie, the financial system could be similarly vulnerable if AI models were disruptedāpotentially leading to a significant crisis.
Read more: The 5 Best Movies About AI
Challenges of Regulating AI
Gensler acknowledged that regulating AI is a global issue, requiring cooperation among international regulators.
He admitted that developing rules to protect against the systemic risks stemming from the financial sectorās growing reliance on AI is no simple task. The interconnectedness and concentration of AI models create an even more complex regulatory environment.
Another concern Gensler mentioned regarding global AI regulation in finance is the risk of bad actors using AI to deceive users.
Fraud is fraud. If you use an algorithm or a model to defraud the public, itās still fraud,remarked the SEC Chair.
However, Gensler doesnāt believe that fighting AI-related scams is solely the SECās responsibility. He expressed confidence that other agencies, like the Federal Trade Commission (FTC), would also step in to tackle the issue.
Gary Gensler Pushes for AI Regulation. Source: Bloomberg
Interestingly, just a couple of weeks ago, Shaktikanta Das, the governor of the Reserve Bank of India, made similar remarks.
Das warned about the dangers of monopolization in the AI technology provider market, the heightened risks of large-scale failures, cyber threats, and data leaks. He also voiced concerns about the āopacityā of AI models, which complicates auditing AI-driven decisions in the banking sector.
Even before that, the European Central Bank raised warnings about AIās potential impact on financial stability. It appears that a consensus is forming among global banking elites on the need for increased regulation of AI technologies in the financial sector.
Crypto Regulation: Emphasis on Disclosure
Part of Gary Gensler's interview was dedicated toā¦ offering congratulations! However, the SEC Chair seemed to be somewhat ironic.
The ledger technology. You know, it's just this Halloween, it will be 16 years since Satoshi Nakamoto wrote that white paper. So happy, Sweet 16 in a week,he said with a smile.
Shifting to the crypto sector, Gensler stressed the importance of complying with established securities laws to build trust in the market.
He stated there is nothing inherently incompatible between blockchain technology and current securities laws, referring to the core principles that have guided the SEC for decades.
But if a market is going to have trust, it needs to come into compliance,the SEC Chair noted.
Once again, Gensler dismissed a major argument made by the crypto industry, which claims itās unrealistic to apply century-old laws to an innovative, rapidly evolving sector.
Read more: SEC Criticized for Security Breach
Gensler emphasized that the SECās role is to ensure investors have access to all the information they need to make informed decisions, while also protecting them from fraud and conflicts of interest.
Right now, a lot of people are losing money because the crypto field is not providing fundamental disclosures,Gensler warned.
After the infamous cases of Do Kwon and Sam Bankman-Fried, itās difficult to disagree with Gensler about the significant financial losses that many investors have faced.
However, itās worth noting that the demand for transparency can work both ways.
For example, earlier this year, cryptocurrency exchange Coinbase filed lawsuits against the SEC and the Federal Deposit Insurance Corporation (FDIC), claiming that these agencies were ignoring Freedom of Information Act (FOIA) requests.
Coinbase had been calling for transparency and requested documents from the SEC related to several closed investigations, including whether ETH is classified as a security.Ironically, Genslerāwho often advocates for transparencyādenied the request.
One thingās for sureāno one can accuse Gary Gensler of inconsistency.
Enforcement and the Legal Framework
The SEC is frequently criticized for its enforcement-driven approach to applying existing securities laws, despite resistance from the crypto industry and some lawmakers.
When asked about this directly, Gary Gensler responded that the agency has always actedāand will continue to actāwithin the legal framework established by Congress.
He stated that the SEC will continue to enforce these laws as they are written and, if necessary, adjust its actions based on court interpretations.
We do everything within the law and how the courts interpret it. If courts interpret it differently, we adjustāthatās part of our democracy,Gensler emphasized.
Itās worth noting that the American crypto industry also places a lot of hope in the judiciary. For example, Coinbase CEO Brian Armstrong has expressed confidence that if the SEC cannot provide clear guidelines, the U.S. court system will help establish precedents.
Meanwhile, Gensler proudly pointed out that the SECās approach to regulating cryptocurrencies hasnāt changed significantly over the decades. In his view, there is no need for change.
Gary Gensler Sees No Need for a New Regulatory Framework for the Crypto Industry. Source: CNBC
He refers to the 1929 stock market crash and insists that the existing regulatory framework was designed to protect investors from such risks in the future. The SECās role, he says, is to ensure that history doesnāt repeat itself, especially in the context of cryptocurrencies.
Gensler continuously emphasizes that current securities laws, when followed, provide a reliable foundation for investor protection.
This is what the SEC is doing, he insists, whether itās overseeing stock markets valued at $50ā60 trillion, treasury markets nearing $30 trillion, or bond and fixed-income markets.
And yes, even related to this newer market where, as I said, all too many people have been hurt or too many people have lost money and lined up in bankruptcy court to try to deal with their claims,he added with a pointed tone.
In other words, Gary Gensler shows no intention of altering his views on how the crypto market should be regulated.
In fact, based on his sharp tone, one might even suspect that Gensler is considering tougher regulations for the cryptocurrency sector.
Gensler and Trump: No Comment
Gary Genslerās repeated emphasis on the importance of transparency backfired toward the end of the interview.
One disclosure from former President Trump is that he would fire you,the interviewer quipped sarcastically.
This refers to Trumpās promises to remove Gensler if he is re-elected as president.
Following this, Gensler was asked about his thoughts on World Liberty Financial, a new crypto platform being developed by Donald Trump and his sons.
I'm not going to comment on any one project. I think your viewing audience can appreciate that it's just not what we do,Gensler replied with noticeable irritation.
Donald Trump Promises to Fire Gary Gensler. Source: newrepublic.com
For context, World Liberty Financial plans to offer crypto lending services on the Ethereum network and will also launch its own token, WLFI, with 62.66% of the supply available for sale.
However, the sale of WLFI will be regulated by the SEC, meaning only accredited investors will be eligible to purchase the tokens.
2026: Whatās Next?
Gary Genslerās term as SEC Chair is set to end in 2026.
When asked how he feels about that approaching date, Gensler unexpectedly shifted the conversation to his family.
Look, I think it's the greatest privilege of my life other than having these three wonderful daughters that I have. But I'm talking about professional privilege,he said.
To give some context, after the untimely death of his wife, who had suffered from cancer, Gensler took full responsibility for raising their three young daughters.
He didnāt hire a nanny and never remarried. This offers a rare personal glimpse into Gensler, who is usually known for his rigorous, detail-oriented approach.
Gary Gensler Isnāt Afraid of Being Fired. Source: Reuters
Gensler shared that every day, he and his colleagues, including fellow commissioners, come to work thinking about how to benefit investors.
We laid out an agenda of 50 or 55 projects three and a half years ago. We've ... adopted 43 of those. You can do the math,Gensler noted proudly.
Work on the remaining projects is ongoing, and Gensler and the SEC continue to move forward.
Butā¦
Elections have consequences. That's a great thing of our democracy,Gensler concluded.
