Will Financial AI Agents Destroy The Economy?

TECH IN THE NEWS

Interference - Microsoft warned that Russia, Iran and China are all targeting the US elections, will work to stoke doubts about its integrity in the aftermath. Meanwhile, Bill Gates just gave $50M to back Kamala Harris.

BRICS Summit - BRICS leaders call for an alternative international payment system, Russia’s Foreign Ministry hit by "an unprecedented cyberattack", and plans for de-dollarization through a Gold-backed 'BRICS bill' currency revealed.

Government AI ‘Guardrails’ - The Biden Administration has outlined a national security memo detailing how agencies should streamline AI operations safely.

Cleared For Takeoff - The eVTOL industry gets a huge lift as the FAA decides to set up guidelines allowing the vehicles to share airspace with helicopters and planes.

Apple Card Fines - The CFPB has banned Goldman Sachs from launching new credit cards, and fined it $65M for misleading claims related to its Apple card program. The CFPB also fined Apple $25M.

COMPANIES TO WATCH

Apple Intelligence - Apple is rolling out AI features, including ChatGPT integration, Visual Intelligence, and creative AI tools like Genmoji and Image Playground.

BlackRock - The asset management giant is jumping headfirst into the AI wave with two new actively managed ETFs aimed at giving investors exposure to the AI market.

ZipHQ - The San Francisco startup uses AI to streamline purchasing. It raised $190M at a $2.2B valuation (up 50%) led by BOND, with DST, YC, and CRV joining in.

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THE HOTTEST THING IN TECH
Could Financial AI Agents Destroy The Economy?

Part 2: Implications and Solutions (Read part 1 on the first AI Agent Millionaire)

Are AI agents on the verge of creating chaos in our economy and wider society? AI Agents in finance have been largely overlooked in the debate over the existential risk posed by AI. The “doomer vs utopian” debate over whether a rogue AI may seek to harm humans may be missing the more urgent point. In Fortune, Johns Hopkins law and economics professor Gillian Hadfield, argues a more real and present concern lies in the potential for AI Agents to disrupt the intricate systems of cooperation that underpin human society, such as the economy. The cooperative framework of our economy relies on a delicate balance of norms, assumptions, rules, and institutions that ensure trust and accountability within the human collective. These rules and bodies really do not seem to be prepared for what is coming fast with AI Agents. 

A New Chapter for AI in Finance

It’s no secret that AI has been making significant inroads into financial services for many years, primarily in the form of algorithmic trading. The industry is now rapidly replacing older models with vastly more complex ones that can reason and learn on their own. AI is also growing in client-facing investment businesses, as assets managed by automated robo-advisers, for example, are projected by the IMF to grow to $2.3 trillion in 2028. For example, Bank of America has doubled its AI & ML patents in the last two years as financial institutions rush to upgrade their systems. According to a March survey cited in American Banker, over half of global and US banks intend to implement generative AI at some level over the next year

Ronan Burke, cofounder and CEO of AI finance startup, Inscribe AI, points out that the advent of AI Agents marks a new chapter in this journey. Their ability to read, write and reason like a human being lets them operate independently across various domains, adapt to new situations, and learn from experience. A significant crisis is presented by the rapid development of financially capable agents like Terminal of Truth (see Part 1) that are increasingly able to independently trade stocks, enter contracts, manage finances, and successfully pitch Marc Andreessen... 

A Challenge to Existing Frameworks

The increasing autonomy of these financial AI agents poses a significant challenge to existing legal frameworks, which are not equipped to handle entities that can operate with limited (or no) human oversight. The lack of clear regulations raises concerns about accountability, as it becomes difficult to identify and hold responsible parties liable for the actions of these autonomous agents. This lack of legal clarity creates an environment where AI agents can operate without the same level of oversight and accountability as humans or corporations, potentially leading to chaos and instability. This is even more pressing due to the increasing mainstreaming of cryptocurrency and borderless finance, which will accelerate under a Trump regime. 

Businesses are required to register with the secretary of state with  a unique legal name, a physical address, and the name of the person who can be sued. But AI agents can set up shop wherever and whenever they like. Difficult questions arise over who to sue if an AI agent engages in harmful activities like selling faulty goods, stealing IP, or breaching SEC regulations. Currently we have no rules in place to govern the actions of these actors in our economy. Taking it even further, an AI Agent could conceivably create its own army of sub-agents without the original human creator’s knowledge. In that case there would be even less certainty over liability or means of enforcement.   

Another scenario the IMF has loudly warned of is that AI systems are shown to perform poorly when faced with novel financial events. So, in a future financial downturn characterized by unfamiliar patterns, AI systems could cause a self-confirming spiral of fire-sales and collapsing asset prices across financial markets. The “black box” nature of AI Agents would likely make managing a crisis very challenging.

Is There a Solution?

Maybe…sort of. So what can we do to address this impending crisis? Hadfield proposes a series of solutions aimed at establishing legal frameworks for AI agents: 

• Mandating registration and identification of AI agents. This would enable a way of tracking and monitoring an AI agents' activities.

• Requiring AI agents to have an identified human or business legally accountable for their actions as we do for businesses. 

• Granting AI Agents legal personhood. This would allow them to be sued directly, hold assets, and be subject to legal penalties for non-compliance.

• Instituting registration requirements for powerful AI models to enhance transparency and enable governments to understand the capabilities & risks. 

Of course this doesn’t solve the problem of ‘rogue agents’ registered anonymously or in other countries, or even intentional ‘chaos agents’ designed to disrupt. However, at least it will go some way to achieving certainty and transparency in the legal finance sector. Regulators will need to be proactive in establishing legal frameworks for AI agents, especially in critical areas like finance, before their widespread deployment leads to unforeseen consequences. Hadfield argues that only by addressing these challenges early on, can we ensure AI agents integrate into our economic systems responsibly and minimize the risk of disruption to human society.

Footnote:

A couple of banking AI startups to watch this week. San Fran banking customer automation startup Interface.ai raised a $30M Series A. Tel Aviv AI retail banking startup One Zero is raising a $100M+ round from Tencent, OurCrowd, and SBI.

Founder of Tech Startup LiveSwitch in Asheville NC has a Go Fund Me to support Asheville Church Network’s efforts to support the worst affected by the hurricane. Funds go directly to an orphan home, single moms, and food banks for the hungry.

TRENDING TOOLS AND BUZZY TECH
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Qualcomm - Next-gen Oryon in-car AI chip for entertainment & automated driving.

Anthropic - New AI model can control your PC autonomously like a human.

iPad Mini - A14 Bionic chip model leapfrogs iPad in compute, cost, pixel density.

OutRival - Credit Karma co-founders new customer service AI agents startup.

Canva - Dreamlab text-to-image generator + other AI design features.

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Solar Geoengineering - 5Mlbs (~$175T) of diamond dust to cool climate by 1.6℃.

CATL - ‘Freevoy’, world's first Extended-range hybrid battery with 249 miles+ range.

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2. 🔥⏱️ Quant Trading Software Company - New Jersey - Large-scale automated day-trading algorithm designed for volatile U.S. equity markets. Profitable through extensive backtesting and live simulation. Seeking equity investment for software company.

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