The annual report of the US financial regulators warns about the dangers of AI

The rapid adoption of artificial intelligence (AI) could pose new risks to the US financial system if the technology is not adequately regulated, a group of regulators has warned.

The Financial Stability Oversight Council (FSOC), which is made up of top financial regulators and is chaired by US Treasury Secretary Janet Yellen, pointed out the potential risks of AI for the first time in its annual financial stability report published on December 14.

The FSOC acknowledged AI's potential to drive innovation and efficiency in financial institutions, but urged companies and regulators to remain vigilant due to rapid technological advances.

In its annual report, the firm emphasized that AI carries certain risks such as cyber security and modeling risks. He suggested that companies and regulators should increase their knowledge and capacity to monitor the innovation and use of AI and to identify new risks.

According to the report, specific AI tools are highly technical and complex, creating challenges for institutions to effectively explain or manage them. The report warns that companies and regulators may overlook biased or erroneous results without a comprehensive understanding.

The report also notes that AI tools rely on large external data sets and third-party providers, creating privacy and cybersecurity risks.

Some regulators, including the US Securities and Exchange Commission — whose chair sits on the FSOC — have investigated companies' use of AI. The White House issued an executive order to address and mitigate AI threats.

Related: Is OpenAI going to drop a new ChatGPT update? Sam Altman says ‘Nah'

Pope Francis, on December 8, in a letter, expressed his concern about the dangers that AI may pose to humanity. He advocates an international agreement to ethically regulate AI development, warning of the danger of “technological tyranny” without proper oversight.

Tech figures like Elon Musk and Steve Wozniak have expressed concern about the rapid development of AI. More than 2,600 tech leaders and researchers, including Musk and Wozniak, have signed a March 2023 petition calling for a “pause” in AI development. They emphasized the “great risks to society and humanity” that could arise from AI developments beyond GPT-4.

Magazine: Real AI use cases in crypto: Crypto-based AI markets and AI financial analysis