As artificial intelligence (AI) and cryptocurrency continue to transform the financial sector, Commodity Futures Trading Commission (CFTC) Commissioner Christy Goldsmith Romero has warned regulators that they must “keep pace” with these developments or risk falling behind and exposing vulnerable individuals to harm.
In a farewell address at the Brookings Institution in Washington on May 27, Romero emphasized that while AI has been present in financial markets for years, it is the rapid evolution of this technology that demands attention. “AI has been around the financial markets for years … it’s the evolution of AI that we need to be paying attention to,” she stated.
Romero highlighted that AI has already improved trading efficiency and boosted returns for investors in certain cases. However, she cautioned that as its use expands, regulators like the CFTC – which oversees U.S. markets for futures, swaps, and some cryptocurrencies to protect against fraud and ensure fair trading – must modernize their oversight.
“I think there’s a lot that’s about to explode there,” Romero said of AI. “I think there’s a lot of real benefit that can come out of it. And I think in terms of regulators keeping pace with that … [you should be] making sure you’re having the promise of AI, but you’re looking out for risk is going to be really important.”
To address these challenges, Romero revealed that she had assembled AI experts on the CFTC’s Technology Advisory Committee. Their recommendations included focusing on internal capacity building and enhancing communication with regulated entities, rather than rushing to adopt new rules. “They said, ‘Look, we don’t want to step on the evolution of AI,'” Romero recalled. The committee suggested that the CFTC should “get your capacity up internally” and engage in dialogue with all regulated entities.
Romero identified two key areas requiring regulatory attention: the need for firms to establish governance structures around AI deployment, and the adoption of best practices such as those outlined in the National Institute of Standards and Technology (NIST) AI Risk Management Framework.
The same AI experts, Romero noted, had also contributed to the development of the CFTC’s cybersecurity efforts, including promoting responsible innovation in cryptocurrency. She emphasized that clearer and stronger regulations are needed for cryptocurrencies like Bitcoin and Ether, which are currently not regulated. “People think they are [regulated], and we see a lot of times people getting scammed,” Romero warned.
Romero supported congressional efforts to divide crypto oversight between the CFTC and the Securities and Exchange Commission (SEC). She observed that stablecoin legislation is progressing more quickly than broader crypto market reforms, with bipartisan support. “A lot of the financial institutions … want to have stablecoin legislation so that they can get into that space,” she explained.
The ultimate goal, according to Romero, is to ensure that all crypto trading entities – including brokers, exchanges, and clearing houses – are registered and comply with regulations. “Until you actually regulate the trading of crypto, you don’t really understand all the nuances,” she concluded.
