The US government is tightening its banking and AI regulations as cryptocurrencies benefit from the recent US banking crisis.
At a March 30 press conference, White House press secretary Karine Jean-Pierre announced that the president had directed banking agencies to consider a series of reforms to reduce the risk of future banking crises. This announcement comes on the heels of public concern over recent bank failures that experts attribute to weakening regulatory measures under the Trump administration.
The proposed reforms include stricter liquidity and capital requirements, more rigorous stress tests, living wills, and better banking supervision. These measures, if implemented, would be a significant departure from the previous administration’s approach to financial regulation.
Vulnerabilities in the traditional financial system are often attributed to fractional-reserve banking, in which banks hold only a portion of their customers’ cash deposits and lend out the rest. This practice, combined with President Nixon’s introduction of fiat money in the 1970s, has raised concerns about the stability of the world economy by exacerbating inflation. Fiat money, unlike gold- or silver-backed currency, derives its value solely from the public’s trust in the issuing government and has no real issuance limit.
Bitcoin as an alternative to fiat
Many experts suggest that bitcoin (BTC), the world’s first decentralized digital currency, could address problems associated with the traditional financial system. As a decentralized peer-to-peer currency, end users can hold bitcoin instead of banks, eliminating a centralized entity that could serve as a centralized point of failure or corruption. Furthermore, its finite supply and decentralized structure limit its potential inflation, a feature that is not present in fiat currencies.
This design also helps mitigate inflation risks, as no authority alone can manipulate the money supply or regulate and monitor who gets to spend it and how. Consequently, bitcoin’s decentralized system provides potential advantages over traditional financial systems by reducing the probability of systemic failure and potentially better holding its value over time if adoption reduces volatility.
US Government vs. AI
At the same press conference, Jean-Pierre addressed the concerns of 1,000 of the world’s leading artificial intelligence experts about the potential risks that artificial intelligence poses to society and humanity. The experts called on the government to regulate AI and ensure its safe and prudent development.
Jean-Pierre referred to the blueprint for an AI Bill of Rights, released last October, as part of the federal government’s current approach to AI-related risks and opportunities. He emphasized the end-to-end process to ensure that AI innovation and deployment proceed with proper prudence and security in mind.
Public concern about the potential impact of AI on human jobs and its threat to humanity has been growing, with some experts calling for an indefinite pause on AI development. Jean-Pierre reiterated the government’s commitment to a comprehensive process to address these concerns.
The president’s directive for banking reforms, along with the continued focus on AI security, demonstrates the administration’s dedication to addressing the fragilities of the financial system and the potential risks posed by emerging technologies.
