Gary Gensler warns of AI bubble and defends crypto record

Former US Securities and Exchange Commission chair Gary Gensler has warned that artificial intelligence is a bubble that could burst within 18 to 30 months, and has defended his approach to cryptocurrency regulation after leaving office.

Mr Gensler, a Biden appointee, had been a target for Donald Trump during the election campaign. Trump vowed to fire him, but Gensler resigned before he could be pushed. The former regulator is now a professor of economics. In an interview, he said the rush into AI and data centres had run ahead of demand and revenue, making a downturn or reversal likely. He said there would be some breakages and companies that could not make it, but the bigger question was the debt behind the boom. He said more than half a trillion dollars had been borrowed collectively in the last 12 months to support data centre construction, and asked where that debt was held, what accounting stood behind it, and how it would affect pensioners and ordinary people.

On regulation, Gensler said AI raised questions about behaviour, threats and financial stability, and that it was unresolved whether any single body could handle them. He said keeping AI aligned with humans was a real risk, despite Trump calling it a hoax. On crypto, he said his concern had been investor protection. Many young people were investing in the hope of a better future and were sometimes misled. He described the thousands of tokens as highly speculative, with no dividends or interest, and compared the sector to the Wild West. As SEC chair he had taken legal action against crypto firms, saying the asset class was rife with fraud, scams and abuses. The SEC, like the UK's Financial Conduct Authority, is tasked with protecting consumers and regulating markets.

Gensler was also asked about Trump's personal crypto ventures. He said the ultimate check was the American public and the ballot box. He warned that periods of heightened populism, income and wealth inequality and polarisation could lead to backsliding in democracy. He said the White House was now involved in the industry and that law enforcement was sometimes used against opponents and to go light on allies. The interview was broadcast as Trump returned to power, with Gensler saying that everything had changed now.