Trump's AI deregulation risks U.S. financial market stability

President Donald Trump is advocating for less regulation on artificial intelligence (AI) in the United States. His recent executive order aims to eliminate regulatory barriers to encourage innovation in AI. This approach contrasts sharply with Canada, which is moving toward stricter AI regulations through the proposed Artificial Intelligence and Data Act. Experts warn that reducing AI safeguards in the U.S. could increase uncertainty for financial institutions. This might lead to a greater risk of financial instability or even systemic collapse. The U.S. has also not endorsed a global declaration advocating for safe and ethical AI practices. AI has significant potential in financial markets. It can boost efficiency, assess risks in real-time, and predict economic changes. Research shows that AI models, such as machine learning, are very effective at detecting fraud and financial distress, potentially revealing problems before they escalate. However, deregulation may give financial institutions more control over AI tools without adequate supervision. Profit-driven AI systems could lead to bias in lending practices, worsening economic inequality. For instance, biased algorithms might deny loans to marginalized communities. Furthermore, AI trading bots have the potential to cause sudden market crashes. Regulated systems are crucial to harness the benefits of AI while mitigating risks. Establishing oversight bodies and requiring transparency in AI operations could help ensure fair practices and reduce discrimination. Policymakers should create robust frameworks to prevent financial crises, learning from past mistakes. The future of AI in finance hangs in the balance. It could either help prevent economic disasters or contribute to them if left unchecked. Urgent action from policymakers is essential to manage AI’s growing influence and ensure economic stability.