I welcome you to the CFTC. With synthetic intelligence (AI) on the forefront of public dialogue, vital actions in digital asset markets to decentralized finance (DeFi) after the collapse of unregistered centralized exchanges and a number of other enforcement actions, in addition to escalated and protracted cyber threats, I stay up for shows and dialogue from acknowledged know-how specialists who serve on the TAC. I wish to thank TAC Chair Carole Home and Vice Chair Ari Redbord for his or her management of TAC, together with placing collectively right this moment’s agenda. I additionally wish to thank CFTC employees Tony Biagioli who’s the designated federal officer (DFO) of TAC, our two new assistant DFOs Drew Rodgers and Lauren Bennett, and Scott Lee in my workplace, and others within the CFTC who maintain TAC operating and helped organized right this moment’s occasion.
I’m excited to acknowledge our new subcommittee co-chairs. Carole Home and Dan Awrey will function co-chairs of the Subcommittee on Digital Belongings and Blockchain Know-how. Tim Gallagher and Dan Guido will function co-chairs of the Subcommittee on Cybersecurity. Nicol Turner Lee and Todd Smith will function co-chairs of the Subcommittee on Rising and Evolving Applied sciences. I’m grateful for his or her willingness to steer the work of the subcommittee and the entire members who’re prepared to serve on these subcommittees.
Accountable Synthetic Intelligence
Synthetic intelligence is on the coronary heart of a lot public dialog proper now, together with the large alternative introduced in addition to some concern of the unknown. Questions swirl round whether or not we all know what we’re unleashing? AI isn’t new. AI has lengthy been part of our on a regular basis life, in addition to part of monetary providers. Out of your Netflix algorithm to your financial institution’s chatbot, People come throughout AI typically with out eager about the concept of AI. In some unspecified time in the future we could have thought the query, am I making this determination as a result of it’s one thing that I would like, or am I being prompted. However typically that will have been a passing thought, simply dismissed. That each one modified with generative AI, which is new.
Whereas there are large advantages of AI, there are rising issues about dangerous outcomes. Notably with generative AI, the listing of potential dangers to each people and society could not but be decided.
The idea of Accountable AI can be not new. AI algorithms, logic, and outcomes ought to be clear and explainable, in a manner that may be audited by people. Unbiased and consultant information has by no means been extra necessary. Hurt ought to be minimized. It’s straightforward to think about AI-enabled market manipulation, fraud, and cyber-attacks. There are actual issues of societal harms like bias, abuse, and disinformation. And, you will need to assume via different societal points, resembling privateness in addition to what kind of jobs may generative AI exchange, and are we shedding some side of human judgment in these jobs that’s necessary to retain.
The CFTC has an necessary mission that features selling accountable innovation. You will need to improve our understanding of the usage of AI in our regulated markets. Relating to our regulated entities, accountable AI raises questions associated to a corporation’s duties relating to AI, together with governance—how are choices being made and who will make these choices. Moreover, there might be better alternative for the CFTC to learn from AI. As a long-time enforcement lawyer, surveillance and information evaluation instantly come to thoughts, however there might be many others. However I additionally acknowledge the good thing about human judgment in these areas, elevating the identical problems with duty relating to the Fee’s personal accountable use of AI.
In persevering with TAC’s examination of AI, I stay up for the presentation right this moment on Accountable AI from TAC member Dr. Nicol Turner Lee, who’s a senior fellow in Governance Research, and the Director of the Middle for Know-how Innovation on the Brookings Establishment. Dr. Turner Lee serves because the co-chair of TAC’s Subcommittee on Rising and Evolving Applied sciences, together with Todd Smith from the Nationwide Futures Affiliation.
TAC will proceed to coordinate with others within the Biden Administration evaluating Accountable AI. I stay up for the presentation on the Request for Remark launched in April by the Division of Commerce’s Nationwide Telecommunications and Info Administration (NTIA) and we welcome Travis Corridor, NTIA’s Appearing Deputy Affiliate Administrator. NTIA’s request for remark advances “its effort to make sure AI methods work as claimed, and with out inflicting hurt.” These efforts construct on the Blueprint for an AI Invoice of Rights, which was introduced on the final TAC assembly by Alan Mislove of the White Home Workplace of Science and Know-how.
As we think about potential harms of AI, we may also hear from TAC member Dan Guido, co-founder and CEO of Path of Bits on the affect of the proliferation of AI Cybersecurity Capabilities. Mr. Guido serves as a co-chair of TAC’s Subcommittee on Cybersecurity.
DAOs and different types of DeFi
TAC additionally continues its deep dive examination of regulatory points associated to DeFi. This examination has change into more and more necessary as extra of the digital asset market is shifting to DeFi, and Congress is contemplating extra laws that features DeFi.
As I stated initially of TAC’s examination of DeFi, the central situation is accountability. We are going to proceed that examination right this moment. Monetary regulators are used to central actors. At this time, we proceed the dialogue about what decentralization means, and the sliding scale that’s typically DeFi.
DeFi isn’t one dimension matches all, and DeFi can take totally different kinds. One kind is a decentralized autonomous group (DAO). At this time we’ll hear in regards to the CFTC’s latest novel enforcement case in opposition to Ooki DAO, from TAC’s very personal DFO Tony Biagioli who was the trial lawyer within the case. We may also have a shows by TAC members Justin Slaughter of Paradigm and Ben Milne, the Founder and CEO of Brale, Inc. They may focus on DeFi fashions, good contracts and governance. We may also have a presentation by Professor Dan Awry on regulating decentralization. Professor Awry serves as a co-chair of TAC’s Subcommittee on Digital Belongings and Blockchain Know-how together with TAC Chair Carol Home.
Cyber Resilience
Third occasion service supplier vulnerability is likely one of the prime cyber threats. In June, the banking regulators issued their long-awaited steering on third-party service suppliers. This steering was largely modeled after OCC steering. At this time we welcome from the OCC, Kevin Greenfield, Deputy Comptroller for Operational Threat Coverage to debate the steering. That is related for not solely swap sellers who’re additionally topic to financial institution regulation, but in addition as finest practices for threat administration within the monetary trade to construct cyber resilience and enterprise continuity.
We are going to hear from TAC members Professor Hilary Allen and Tim Gallagher on challenges with understanding cybersecurity threat and implications for operational threat regulation. Mr. Gallagher serves because the co-chair of TAC’s Cybersecurity Subcommittee.
Lastly, we can have a presentation on the State of Monetary Sector Protection and Collaboration to Fight Cyber Threats by Steven Silberstein of the Monetary Providers Info Sharing and Evaluation Middle (FS-ISAC). FS-ISAC is a non-profit group that advances cybersecurity and resilience within the monetary system, whose board of administrators consists of cybersecurity executives at monetary establishments.
Every of those points is entrance and middle earlier than us. I actually recognize every of the TAC members’ willingness to share your know-how experience and viewpoints. As at all times, I encourage a broad dialogue of a variety of views, right this moment and going ahead.