Regulators are shedding light on scammers who exploit the allure of artificial intelligence (AI) to promote cryptocurrency trading systems with false claims of high or guaranteed returns.
With the growing trend of using automated software for trading, the Commodity Futures Trading Commission (CFTC) has issued a customer advisory advisory emphasizing that these AI systems cannot definitively predict market movements.
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The customer review titled “AI Won’t Turn Trading Bots into Money Machines” exposes fraudulent tactics used to lure investors, telling stories like that of Cornelius Johannes Steynberg, who swindled more than $1.7 billion in Bitcoin (BTC) of unsuspecting victims.
THE CFTC subsequently advised traders to avoid seductive assurances of high gains from AI-assisted tools, warning that such exaggerated claims often backfire.
Melanie Devoe of the CFTC’s Office of Customer Education and Outreach says traders should approach these AI promises with skepticism, recognizing the potential for exploitation by unscrupulous individuals to lure the unwary.
Despite these concerns, some major exchanges, like Bitget, continue to innovate with AI robots. Last July, Bitget CEO Gracy Chen said their AI systems work by processing historical strategic data for continuous improvement.
Simultaneously, the CFTC divisions and the Office of Technological Innovation spear a Request for Comments (RFC) to better understand the current and potential uses of AI (and its perils) in derivatives markets.
Casting a wide net for commentary, the CFTC aims to uncover the role of AI in various facets of traditional and crypto trading, from transaction risk management to enhanced market surveillance methods, as well as the cybersecurity implications , analysis and customer service spheres.
CFTC Chairman Rostin Behnam emphasized the importance of aligning prudential oversight with technological advancements, ensuring that customer protection remains paramount as markets evolve.
Behnam positioned the RFC as a central part of the Commission’s strategic direction to foster a data-driven approach to its regulatory interventions and oversight.
The agency also highlighted the potential benefits of AI in the context of regulatory compliance, in particular for market surveillance, anti-money laundering (AML) strategies and reporting obligations.
Investors and market participants are encouraged to provide feedback by April 24, 2024, as the CFTC considers new regulations or guidance that could shape the future of AI in consumer and crypto trading.
