It is no longer news that the securities and exchange commission (SEC) in the U.S. led by Gary Gensler is aggressively pursuing crypto regulations enforcement. What’s new is that the agency is extending its focus to artificial intelligence, thus focusing on AI tokens.
Gensler on Tuesday said he had AI on his radar, sending a signal to crypto firms moving towards AI that they aren’t out of the woods yet. In a long thread on X (Twitter), he acknowledged that AI is “the most transformative tech of our time,” but also stressed that “bad actors” can harness its power to influence capital markets.
“We @SECGov are technology neutral,” Gensler wrote. “We focus on the outcomes, rather than the tool itself. Securities laws, though, may be implicated depending upon how AI tech is used. Within our current authorities, we’re focused on protecting against both the micro & macro challenges of AI.”
Among other things, he highlighted the use of the technology for applications such as robot-advisers and AI brokerage apps, which can be used in the fintech sector.
“AI is used in finance for account openings, compliance programs, trading algorithms, sentiment analysis and more,” he said, noting that the technology can create more risk for consumers with its ability to significantly improve customer targeting and narrowcasting,” he continued.
SEC Bent on Prosecuting Laws Violators
The SEC under Gary Gensler has come down hard on the crypto space in the U.S. this year, with top crypto exchanges like Coinbase and Binance in court for violating securities laws by allowing the trading of what it calls unregistered securities.
While there is no clear regulatory direction for the industry currently, the SEC insists that actors have sufficient guidance and direction. Interestingly, Gensler says his agency is still determined to prosecute anyone who violates the securities laws, regardless of what technology they use.
“Under the securities laws, fraud is fraud,” Gensler continued. “The SEC is focused on identifying and prosecuting any form of fraud that might threaten investors, capital formation, or the markets more broadly,” he said.
Coinbase has filed for dismissal of the case against it by the SEC, claiming the agency has no clear definition for securities, while Binance announced it was ready to challenge the allegations in court. Whatever becomes the outcome of these two cases will significantly affect the crypto industry in the U.S., experts say.
Crypto Regulation to the Rescue
With the SEC’s enforcement approach to regulation, the crypto industry yearns for a clear regulatory framework. This will mean having a clear definition of what securities are, and what they aren’t. Thankfully, the U.S. congress is already working towards coming up with these regulations in order to avoid killing innovation in the crypto industry.
Meanwhile, other countries and jurisdictions such as Hong Kong and the United Arab Emirates (UAE) have drafted regulations that allow the industry to work with no ambiguity. Top crypto exchanges and firms have moved to Hong Kong and Dubai recently.
Bnance is the most notable of all, which recently secured an MVP operational license from Dubai’s Virtual Assets Regulatory Authority (VARA). With this trend, more loss of crypto innovation will come to the U.S., unless the congress acts quickly to intervene.