CFTC Commissioner Proposes Heightened Penalties
The Commodity Futures Trading Commission's (CFTC) Kristin Johnson has proposed recommendations to address the use of artificial intelligence (AI) in financial markets, including decentralized finance (DeFi). In a speech delivered at the Sidley Austin and Rutgers Law School Fintech and Blockchain Symposium, Commissioner Johnson outlined her concerns about AI and how it applies to DeFi.
"Deploying AI in ecosystems running on blockchain technology raises novel issues for supervision, risk management, and compliance, as well as enforcement," Johnson said.
AI has been integrated into various aspects of financial markets, including brokerage apps, compliance programs, and robo-advisers. In DeFi, AI can be used in automated trading and algorithmic trading. However, AI has also raised concerns among regulators over potential risks such as manipulation, fraud, bias, and customer protection.
Johnson's proposed recommendations include heightened penalties for AI-related misconduct in financial markets. She also emphasized the need for collaboration between regulators and industry participants to develop effective oversight frameworks for AI in finance.
"We need to be proactive in addressing these issues and ensuring that AI is used responsibly and ethically in our financial markets," Johnson concluded.