In recent weeks, discussions about the future of artificial intelligence (AI) regulation and policy have intensified, particularly regarding the potential changes that could come with the change in White House administration. Here’s an analysis of what might lie ahead for AI policy and its implications for the financial sector.
The Fate of Biden’s AI Executive Order
President-Elect Trump will likely rescind Biden’s Executive Order on AI, though the situation is more nuanced than it might appear at first glance. While the Republican party traditionally favors deregulation, recent populist movements have shown increasing skepticism toward big tech companies, particularly in the social media space, creating an interesting tension in policy approaches.
Key influencers like Peter Thiel and Elon Musk could play decisive roles in shaping future policy. Musk’s position is particularly complex: While generally opposed to regulation, he’s also associated with the Effective Altruism movement, which has long warned about existential AI risks, particularly around artificial general intelligence, also known as AGI. Despite these contradictions, the most likely outcome appears to be the replacement of the current Executive Order with a similar but less stringent voluntary code, particularly regarding model sharing and industry standards.
Emerging Policy Directions
The America First Policy Institute is reportedly preparing an AI policy document for the incoming administration. Based on current indicators, we can expect significant changes in policy direction. The new approach is likely to move away from centralized safeguards on innovation and development, placing greater emphasis on industry self-regulation instead. The geopolitical aspects of AI are expected to receive increased attention, especially regarding technology sharing with China. Military applications of AI may face fewer restrictions, with development in this sector potentially being actively encouraged. Perhaps most significantly, we’re likely to see unprecedented politicization of AI technology policy, potentially overshadowing any long-term strategic planning or implementation.
Implications for the Banking Sector
Despite potential regulatory changes at the federal level, banks shouldn’t interpret this as a green light for less careful AI deployment. The existing banking regulations remain firmly in place; liability and reputational risks remain significant concerns. In fact, the threat of fraudulent AI solutions may increase in a less regulated environment. Due diligence requirements are still essential, and banks must maintain their rigorous approach to AI implementation.
Recommendations for Banking AI Projects
For those leading AI initiatives in banking institutions, the path forward requires even greater vigilance. Banks should maintain their current levels of caution in AI project development while potentially strengthening their due diligence processes for AI solutions. The importance of ethical AI standards and risk reduction remains paramount. It would be a serious mistake to interpret potential regulatory rollbacks as a reduction in responsibility.
Ironically, the absence of clear regulatory frameworks may actually complicate matters for banks. Greater regulation and standardization could help establish clearer baselines for technology implementation and address many of the market’s current concerns across industries. These conditions create an interesting paradox where less regulation might make implementation more challenging for conscientious institutions.
Looking Ahead
The potential shift in AI policy will be a complex challenge for technology companies and traditional financial institutions. The regulatory landscape may change, but the fundamental need for careful, responsible AI development and deployment remains unchanged. If anything, it may become even more critical in a less regulated environment.
Banks and financial institutions would do well to maintain their careful approach to AI implementation, regardless of the political environment. The stakes are too high to do otherwise. The coming years will likely require increased diligence and internal oversight from financial institutions, even as external oversight potentially decreases. Success in this environment will require a delicate balance of innovation and prudence, regardless of the regulatory framework in place.
Its now more important than ever to keep track of what’s next in the world of commercial banking. Register now for the Datos Insights webinar, Top Trends in Commercial Banking 2025, taking place on January 15th 2025.
