‘We don’t know the dangers of AI’

Representative Maxine Waters (D, CA), the leading Democrat on the House Financial Services Committee, says artificial intelligence is ahead of Congress’s ability to regulate it and lawmakers must act quickly.

“We don’t know all the dangers of AI,” Waters said in an exclusive interview with Yahoo Finance on Thursday. “We don’t know the creations they might make, and I think we have to be careful. We have to be very careful. We have to have rules. We have to get on it right away.”

Waters is calling on House Financial Services Committee Chairman Patrick McHenry (R, NC) to hold a hearing as soon as possible on Microsoft’s ChatGPT and other artificial intelligence advances, as well as on any risks to the financial sector and the housing sector.

“[We need] to make sure that consumers aren’t taken advantage of, that we get the truth and that the biases, which are already in algorithms, wouldn’t be the cause of problems in AI… we really need to get to work to make sure that we have regulations that protect everyone,” Waters said.

Chairman Rep.  Patrick McHenry, RN.C., right, accompanied by Ranking Member Rep.  Maxine Waters, D-Calif., left, speaks as Federal Reserve Chairman Jerome Powell appears before a House Financial Services Committee hearing in Washington, Wednesday, June 21, 2023. (AP Photo/Andrew Harnik)

Rep. Patrick McHenry, RN.C., right, and Rep. Maxine Waters, D-Calif., left, at a June House Financial Services Committee hearing. (AP Photo/Andrew Harnik)

Waters told Yahoo she has not heard from McHenry. Laura Peavey, a spokeswoman for Republicans on the House Financial Services Committee, said, as Waters knows, “we’ve talked about holding a committee hearing on AI in the fall.”

Waters says she’s leaning towards the idea of ​​starting a separate agency.

“I really believe this technology is so new and so different, and we need to educate people about the chatbots and the black box and stuff,” Waters said. “We really need a separate agency to … have the regulations necessary for this new technology.”

Waters cited the position of the Consumer Financial Protection Bureau, which said AI technologies still need to comply with existing consumer protection laws.

Earlier this year, the agency released a policy statement explaining what constitutes misuse of AI technology after taking multiple actions in 2022. One stipulated that digital marketers who use algorithms will be held accountable under the Consumer Financial Protection Act and violators will be held accountable.

Waters is particularly concerned to ensure that AI does not adopt biases that harm certain types of consumers. A Congressional AI task force has raised ethical and legal concerns about algorithmic bias and discrimination, particularly if automated programs fail to function as intended or adversely affect members of protected classes.

The task force found that these technologies can anchor historical inequalities in financial services and housing markets through the use of data that reflects underlying bias or discrimination.

‘Very close’ on stablecoin note

Waters also said during the interview on Thursday that Democrats and Republicans on the House Financial Services Committee are “very close” to an agreement on bipartisan legislation to regulate stablecoins, but “not yet that far” when it comes to regulating crypto in the US. in general.

“I think we can get a bipartisan piece of legislation that will take care of it [with] stablecoins whose companies have the assets they claim to protect consumers… stablecoins [are] moving toward some opportunities to get the kind of regulation needed,” Waters said.

Waters worked closely with McHenry on a bill to regulate stablecoins, but it fell apart when the Republicans took over the House and the two sides started from scratch. Republicans on the committee have incorporated some of the Democrats’ concerns into a new draft of the bill, although there are still some unresolved concerns.

But when it comes to a larger discussion concept for a general framework for regulating crypto, Waters says there’s still “a lot of work to be done.”

“I know Mr. McHenry is trying to come up with other attempts to deal with crypto, but we are certainly not there yet,” said Waters.

The bill aims to clarify gaps between the rules of the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC). It also tries to determine what companies must do to register with the SEC and requires the SEC to write new rules that are modified to govern crypto.

The bill also attempts to clear up a long-unsolved issue for the crypto community: what criteria would lead to a crypto token being classified as a commodity or as a security. It gives the CFTC jurisdiction over digital commodities and clarifies the SEC’s jurisdiction over digital assets offered as part of an investment contract.

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