US Crypto Regulatory Body to Leverage AI for Application Review

The US Commodity Futures Trading Commission, known for its openness to digital assets, is now turning to artificial intelligence to compensate for a significant reduction in its workforce. Chairman Mike Selig revealed this in an interview, stating that the agency is exploring the use of AI and automation to streamline its processes, particularly in reviewing registration applications and conducting market surveillance. Currently, the registration process involves manual document submission, which Selig aims to automate to improve efficiency. "We are developing systems to automate this process, making it more efficient," he said. "AI tools can review applications, flag issues for staff, and make their jobs easier and faster, while also rejecting incomplete or inaccurate submissions." The agency is training its staff to use Microsoft's Copilot and is also building in-house tools for reviewing swap data and market surveillance. Selig emphasized the importance of embracing technology, stating that it will help the agency reach conclusions about certain trades more effectively. As the chairman of the US derivatives regulator for the past four months, Selig has been proactive in addressing emerging technologies, including crypto and prediction markets. One significant initiative has been the development of a joint guidance with the Securities and Exchange Commission to establish a taxonomy for digital assets, providing clarity on regulatory jurisdictions. Selig believes this taxonomy is a crucial development, allowing market participants and consumers to engage with crypto systems with confidence. "Now we have clarity, and we understand our responsibility at the CFTC. We will take action to prevent fraud, manipulation, and insider trading in crypto markets, which will have a significant impact, along with providing clarity for consumers and users of the asset class." The agency's involvement in prediction markets has been contentious, with Selig's stance that the CFTC is the sole regulator of these firms putting him at odds with states that have challenged companies for violating state gaming laws. The CFTC has sued several states, defending its exclusive jurisdiction, and has also joined a Department of Justice case against a US Army soldier accused of insider trading in prediction markets. Selig emphasized the agency's commitment to enforcing regulations in prediction markets, stating, "We are on the case and continue to watch for news. We will take action against bad actors in our markets, and we're taking this very seriously. It's not lip service, and market participants should be on notice."