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In a symposium held at Sidley Austin and Rutgers Law School, with a focus on fintech and blockchain, CFTC Commissioner Kristin N. Johnson gave her opinions on some of the challenges and concerns concerning artificial intelligence (AI) in decentralized finance (DeFi). 
Johnson pointed out that AI introduces complex issues in areas such as regulatory supervision, risk management, and compliance, particularly when combined with blockchain technologies. The inherent structure of DeFi, according to her, lacks a central overseeing body, differing from traditional financial systems and complicates regulatory enforcement. 
Proposed Measures for AI Governance 
In response to these concerns, Johnson has recommended several measures to better manage the risks associated with AI in financial markets. She, as a result, advocates for a principles-based regulatory approach to AI, emphasizing the need for heightened penalties for intentional misuse of AI in activities such as market manipulation and fraud.&nbsp; 
Her proposal, therefore, includes establishing an “AI Fraud Enforcement Task Force” within the CFTC. This task force would collaborate with other regulatory bodies like the Federal Reserve and the Securities and Exchange Commission to enhance enforcement capabilities. 
Integration and Regulatory Challenges 
Johnson highlighted the difficulty in applying longstanding regulations like the Bank Secrecy Act to DeFi systems, which are decentralized and operate without traditional intermediaries. This situation, she noted, blurs the lines of accountability and complicates the enforcement of compliance measures. 
Additionally, the CFTC has shown its commitment to addressing these emerging technological challenges by <a href="https://www.cryptotimes.io/2024/05/02/cftc-designates-dr-ted-kaouk-as-the-first-chief-ai-officer/" target="_blank" rel="noreferrer noopener" data-wpel-link="internal">appointing</a> its first chief AI officer, Ted Kaouk. The agency concurrently plans to host an “<a href="https://www.cftc.gov/PressRoom/PressReleases/8904-24" target="_blank" rel="noreferrer noopener" data-wpel-link="external">AI Day</a>” to foster discussion on how AI is reshaping financial markets and to consider future regulatory strategies. 
Moreover, House Financial Services Committee Ranking Democrat Maxine Waters urged Biden to nominate Johnson as Assistant Secretary for Financial Institutions at Treasury. Waters cited Johnson’s expertise in data privacy, AI, and digital assets.&nbsp; 
Maxine added, “In her role as CFTC Commissioner, Commissioner Johnson has prioritized maintaining the integrity of our financial markets.” If confirmed, her extensive background in AI, data privacy, and digital assets could influence future financial regulatory policies at a national level. 
<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow"> 
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CFTC Commissioner Johnson Advocates AI Governance in DeFi

The Crypto Times

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