The increasing use of artificial intelligence in financial systems is driving the industry towards a model where machines perform transactions on a large scale, posing new challenges related to control, oversight, and infrastructure, according to executives from Microsoft and Chainalysis. Bill Borden, Microsoft's corporate vice president of worldwide financial services, stated on Tuesday that legacy systems will face growing pressure as transaction demands become more complex.

The turning point occurs when latency, scale, and complexity start to impact a company's ability to compete, forcing firms to reevaluate their system architecture, he said at an event hosted by Alchemy in New York City. Although automation has long been a part of finance, Borden noted that the focus is now shifting from capability to trust. The question is no longer about whether technology can automate tasks like executing a hedging strategy, but rather whether it can be trusted and audited.

To manage this transition, Microsoft is developing tools that assign identities and permissions to AI agents and track their actions. In regulated environments, Borden emphasized that firms must be able to demonstrate what controlled a system and whether it adhered to policy when decisions are made without direct human input. Jonathan Levin, co-founder and CEO of Chainalysis, pointed out that the cryptocurrency sector already provides a working model of automated finance.

Blockchain networks process large volumes of transactions through smart contracts and software-driven wallets, creating an environment similar to agent-based systems. Levin noted that the crypto sector has been preparing for these developments long before other parts of the financial services industry. This experience also extends to risk management, with Levin citing efforts to track illicit funds across thousands of different wallets as an example of the kind of monitoring needed in a system where transactions occur at scale without direct human input.

Looking ahead, both executives expect a mix of systems to coexist. Levin predicted that the majority of commerce in 10 years will be settled on public infrastructure, while Borden envisioned a more integrated approach linking public blockchains, private networks, and existing rails.

Borden noted that traditional rails will continue to exist, with software acting as the layer that connects them.