Artificial Intelligence and Cryptocurrencies: Regulatory Frenemies in the Making

cryptonews.com:

Both at the forefront of technological innovation of investor interest, crypto and artificial intelligence (AI) are forming something of a love-hate relationship. Aaron Brown – former head of financial market research at AQR Capital Management – argued in a recent opinion piece that both industries represent competing areas of venture capital interest, as well as dueling sources of fear for regulators. 

“The collapse of crypto exchange FTX in November 2022… combined with the demo release of ChatGPT the same month, sent venture capital money fleeing from crypto and into AI,” wrote Brown in a Bloomberg article on Thursday. 

The crypto investor isn’t alone in his analysis: Startup investor and Shark Tank star Kevin O’Leary noted in February that venture investors are moving on from crypto to the next “big thing”, which is AI. “Aftermarket trading for existing projects is at massive discounts,” he said at the time. 

While crypto has still raked in billions of dollars of investor capital this year, a litany of enforcement actions from the U.S. Securities and Exchange Commission (SEC) against the industry has investors shrinking their crypto exposure wherever the agency rears its head. 

BNB, for example – the native token for crypto exchange giant Binance – has fallen ~20% in value since the SEC alleged it was a security in its lawsuit against the company earlier this month. That said, AI may have its own regulatory concerns on its hands – but for different reasons. 

As Brown describes, crypto is largely feared for enabling some degree of anarchy, bypassing centralized financial institutions from which governments can collect taxes, and regulate problematic behaviors. On the other hand, AI “threatens individual human agency and