House Financial Services Subcommittee Holds Hearing on AI in the US Financial System

The House Financial Services Subcommittee on Digital Assets, Financial Technology, and Artificial Intelligence held a hearing on September 18 titled “Unlocking the Next Generation of AI in the U.S. Financial System for Consumers, Businesses, and Competitiveness.” The hearing focused on how market participants are using artificial intelligence (AI) in the financial services industry, potential use-cases, and the importance of ensuring data privacy.

Subcommittee Chairman Bryan Steil (R-WI) inquired whether a new regulatory regime would be needed to ensure guardrails are in place as the technology continues to develop. Witnesses Matthew Reisman of the Center for Information Policy Leadership, and Dr. David Cox of the MIT-IBM Watson AI Lab, both noted that guardrails could be built around the existing regulatory framework, and that Congress could make changes as needed, rather than starting with a new regulatory regime. The Subcommittee’s Ranking Member Stephen Lynch (D-MA) noted that in other areas regulatory “sandboxes” have been beneficial to analyze innovative products, services, or business models with real customers under relaxed regulatory requirements for a limited time.

Other members of the Subcommittee discussed the importance of the United States leading the “AI arms race” and ensuring regulations are carefully tailored as to not delay or prevent innovation. Following a question from Committee Vice-Chair Bill Huizenga (R-MI), Daniel Gorfine the Former Chief Innovation Officer & Director of LabCFTC, noted that regulation also tends to fall harder on smaller entities like community banks who are unable to keep up with the costs of compliance. Members of the committee also noted that regulations can be “clunky” and may not be able to keep pace with the changing technology. Instead focusing on use-case regulation rather than regulating the technology itself may be a better approach.

There are several AI legislative measures currently circulating in Congress; however, the bandwidth for taking up a measure is somewhat low due to competing priorities.

Click here to watch an archived video of the HFSC subcommittee hearing.