And Mr. Cain. So the SEC is clearly looking closer at the use of AI tools in finance. We know that from the agency's latest exam priorities. But in parallel, a year ago, you embarked on this rulemaking process. And I want to start by asking what sort of additional authority or power you feel you need through a rule that you wouldn't be able to regulate through examinations. So let me say this. I think that the use of artificial intelligence, which has been around for at least ten years, has taken on, and it's an important transformative part of our economy, every bit as transformative as the Internet, probably more every bit as transformative as 100 years ago when we electrified so many things in our markets, our factories, the automobile, the refrigerator. That transformative in finance. It's being used today by many brokerage apps and investment advisors when they're selling to the public, just

as when we're looking at movie apps that have figured out long ago that I'm a rom-com type of guy, and I'm going to watch those movies. And so it's to ensure that in the algorithm, in the actual math of the algorithm, that they ensure that they put the public's interest, their customers' interests ahead of the investment advisor and broker dealer. That's it in a nutshell. In a nutshell, do you think that there's financial systemic risk still looming large because of the adoption of AI and AI models ultimately being too similar from one brokerage to the next? I do think so. I said I like rom-com, so I'll go with that wonderful movie her. When Scarlett Johansson played this virtual assistant when she went offline late in the movie. 8316 folks were broken-hearted. We could see that in finance. There's right now two or three large cloud providers that are backing some of

the biggest investments in what's called generative AI. As the financial sector more and more relies on those big base models. It is not only possible, but likely that some financial crisis in the future is that everybody is relying on it. And whether it's like Scarlett Johansson going offline or if Scarlett Johansson of the future I'm talking about the AI model is hurting and taking the capital markets off of some, you know, various cliff. And I think that's a hard project to solve because of the dominance of a few base models likely in the future. Do. Therefore, more clear rules need to be envisaged here. Is examination the tool of choice? So I'm separating out. There are important investor protection issues directly about the conflicts, and I think we can do that and proceed forward. I've asked staff for recommendations on a re-proposal of that role. I think a second area we didn't talk about is fraud. Fraud is fraud.

If you use the algorithm or the model to defraud the public, it's still fraud. But I think that that's going to play out not only for us, but in other agencies around the country, the Federal Trade Commission and elsewhere. But on these systemic issues, I think it's a tough challenge that global regulators need to come together. And how do we protect against what is likely to be a very concentrated, interconnected system that's relying, you know, like I say, 8360 and relying on Scarlett Johansson for their love was one thing in a fictional movie. But what do we do here? If you're just joining us, something like television and radio, we're speaking with the FCC chair, Gary Gensler in Michigan. So you're also busy in parallel with the crypto industry. I think there's consensus on the eve of an election that all of those parties

involved in responsible want to hammer out some sort of new jurisdictional framework for crypto regulators to make some progress on settling oversight of that industry. Can you talk to us about the work you're doing there and if you're making any progress in that field? Look, there's nothing incompatible about 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. There's nothing incompatible about a ledger technology, a decentralized ledger technology, and the securities laws. And it's important that in the securities markets, that investors get to decide on their investments, but they get the proper disclosure that we guard against conflicts of interest and the like. And we're going to continue to do that at the Securities and Exchange Commission. If a market's ever going to have trust, it also needs to come into compliance. And a lot of this field, and we've seen the challenges in this field where a lot

of people have lost money. Regular investors have lost money in a field that's not providing the fundamental disclosure about their projects, about these investment contracts and these schemes. And that there's a field that has a lot of conflicts in the middle of it. Something interesting has been happening over the last year where you've been focusing on policy and regulation in the Fifth Circuit Court of Appeals. There have been many suits filed in what is a kind of business-friendly court. How do you have to respond to that and adjust the policy side in response to the litigation side? Mr. GENSLER. No, no, I think it's a really good question. We do everything we do within the law and how the courts interpret the law. If the courts interpret it differently, we adjust. That's what we do. It's part of our great democracy. But I do think that we're focused every day on how we drive lower cost in this system.

That's why we did equity market reform. I would note unanimously through our five-member commission. It's why we've worked so hard on the Treasury markets, this $28 trillion market at the base of our capital markets and driving lower cost, which is called efficiency and lower risk, which is quite a resiliency in these really consequential, significant markets. Just for a moment reminding our TV and radio audience we are in a conversation with FCC Gary Gensler. And just to stick with the crypto aspect for a moment more. There is, though, this ongoing narrative that you haven't changed that much, you haven't adjusted much in terms of it is regulation via enforcement. Will that change? Do you see laws coming to back from Congress rather than you having to enforce by enforce, to regulate? Caroline We have benefited for nine decades from robust laws from Congress and roles from various agencies, not just the FCC, but the Commodity Futures Trading Commission, another

significant and great agency that I was honored to chair to help promote the markets, to protect investors, to promote capital formation and the markets in the middle. And that's what we'll continue to do, whether it's related to the stock markets, 50 or $60 trillion stock markets, whether it's related to the Treasury markets, as I said, nearly $30 trillion, whether it's related to the bonds 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. And fundamentally, what, you know, President Roosevelt laid out and it's been looked at over the years. Congress could adjust, but at the fundamental it's about disclosure to the public so the public can decide and then guarding the public against the conflicts and the fraud and things.

that happen in the capital markets that are unregulated. We saw that happen in the 1920s. None of us were alive. But you can read about it. And we don't want that to happen to the investing public and undermine the trust in the overall capital markets as we know them. Talking of disclosures, one disclosure from former President Trump is that he would fire you ultimately unsurprising to you, I'm sure. But also he's got some plans for plans, of course, to introduce his own crypto platform and he's been working on it. What do you make of that? 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 and so I Carolina I'll let you go to your next question. Well Mr. Gensler, I'll jump in. You talked about the investing public that you serve. Right? And there is something happening where private credit firms are taking private

market assets where you could debate the real valuation, and they're wrapping them in products like ETFs that are somewhat sort of more retail-friendly. It's a new area. It's something interesting happening, and I know it's of intense interest to our audience. How do you regulate that, and how much are you personally thinking about that right now? Well, let me put it in context. Our dollar credit markets, where you can your commercial credit and your borrowing, are probably worldwide in excess of $30 trillion. And banks and non-banks alike play important roles in that. And so what we've. But private credit existed when I started at Goldman Sachs 40 some years ago. I mean, there were direct loans that could be made outside of the banking system. But today, you've seen a growing share involved in that. I think that competition is good for borrowers, investors, savers, and the like. That's competition in our capital

markets. But it still has to sort of comply with the basic tenets of risk management, disclosure, transparency, and the like. Our role in it as a capital markets, you know, oversight is an important one, but I think the competition is actually benefiting a lot of borrowers. I would note this. It hasn't at this size, it hasn't lived through a downturn. So it hasn't been tested in, you know, the inevitable at some point downturns that would come. There's also some intersections between this private credit emerging system and the insurance sector and the banking sector, but particularly its intersection with the insurance sector that bears look and ratings as well, the use of private letter ratings on some of this. So we're looking at some of this. But I think overall, it's capital markets benefiting and the public benefiting from competition. Apollo and State Street have such a private market ETF pending before the

FCC. My colleagues tell me it's controversial. So what can you tell me about that specific case study? I guess I can tell you the same thing I told Caroline earlier that, you know, in a role like I'm a very I'm asked to be disciplined. I try to stay this way. I don't comment on specific products or projects that may be in front of the staff or in front of our five-member commission. So I'm going to demure on that, but I hope you're listening. Public understands. Why do you worry about that liquidity mismatch, though? A potential one? Look, there's an illiquidity mismatch in banks. So our $26 trillion banking system in the U.S. has $20 trillion in deposits, run up all deposits. Of course, a lot of them are insured, but a lot of them are uninsured. And so banks themselves transform liquidity, transform what's called maturity or duration.

And then you think about it in the non-bank sector. You have, frankly, a better match of maturity of the liability side of a private fund and the assets they hold. So it may, it's not without risk, but it might be in a part of the market too that can better bear that illiquidity risk. Mm. It's really interesting how you've got this as a line of sight, but also everything we've just articulated. I crypto private markets, a lot to get on with. And your term is what, until June 2026. But will it run until then? Many feel that perhaps not. What do you want to get done in the remaining months or so? 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. And so every day I come into work and think with my colleagues and fellow

commissioners, how do we get things done for the investing public? And the issuing public that the markets in the middle work for them. Not that the issuers and the investors are working for the intermediaries in the markets in the middle, but the markets work for them. So that just like lowering costs through competition, transparency and the like and access to the markets and then resiliency try to use like central clearing and so forth, the back side and the plumbing. So we we've gotten we laid out an agenda of 50 or 55 projects three and a half years ago. We've actually gotten across the line proposed and adopted 43 of those. You can do the math. The other projects, a number of them I've asked staff to we consider possible proposals, but we're still working on some rules around market structure of the Treasury market, some rules around central clearing and segregation of funds and the like. But we're going to continue to move

forward. You know, and elections have consequences. That's a great thing of our democracy.

SEC Chair Gensler on Regulating AI, Cryptocurrencies

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