Hearing Entitled: Unlocking the Next Generation of AI in the U.S. Financial System
House Subcommittee on Digital Assets, Financial Technology and Inclusion
2025-09-18
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Source: Congress.gov
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The subcommittee on digital assets, financial technology, and artificial intelligence will come to order. Without objection, the chair is authorized to declare recess at the committee at any time. The hearing is titled, Unlocking the Next Generation of AI in the U.S. Financial System for Consumers, Businesses, and Competitiveness. Without objection, all members will have five legislative days with which to submit additional material to the chair for inclusion. in the record. I now recognize myself for four minutes for an opening statement. Artificial intelligence is rapidly changing industries across the world. Few sectors are more prepared and more impacted than financial services. For decades, our financial institutions have been at the forefront of development and deploying AI technology, from algorithmic trading to machine learning systems used in risk management to combating fraud in better and faster ways. The rise of generative AI represents the next transformative step, which could bring new efficiencies, new opportunities, and potential new risks to our financial markets. This subcommittee has demonstrated strong leadership in charting a path forward for transformative technologies, including digital assets, most recently through the Clarity Act and the Genius Act. Today, we turn our attention to artificial intelligence, examining how it is being deployed in financial markets and assessing whether the current regulatory framework is prepared to keep pace. The United States has long been a hub for financial innovation, and we must ensure our policies support responsible AI adoption, not stifle it, as seen during the Biden-Harris administration. Recently, the Trump administration released its AI Action Plan, which emphasizes American AI leadership across all sectors. We must look to how we can enhance American leadership and competitiveness in financial technology. It is essential that regulations strike the right balance, fostering innovation while ensuring investor protection and market integrity.
Our financial regulators must be cognizant that this technology uses, and Congress must provide the clarity to encourage responsible development here at home. It's paramount our markets are not left behind in the global race for AI leadership. We're fortunate to have with us today a panel of esteemed experts who bring a wealth of knowledge and experience in artificial intelligence and its deployment in the financial system. The information we learn today will build upon our prior work and assist the subcommittee in shaping policies that encourage responsible innovation in financial markets while cementing American AI leadership. I want to thank our witnesses for being with us today, and I look forward to today's discussion. I'll now recognize the ranking member of the subcommittee, Mr. Lynch, for four minutes for an opening statement.
Thank you very much, Mr. Chairman, and thank you for your courtesy. I had a vote on a subpoena in another hearing, and that caused my delay, but thank you. And I want to thank this panel of witnesses for your willingness to come before the committee and help us with our work. This hearing continues this committee's oversight work to examine the use of AI in the financial services and housing sectors. As evidenced by the final report issued by the bipartisan working group that Chairman Hill and I co-chaired last year, financial institutions, fintech companies, and even financial regulators are already deploying AI to maximize operational efficiency and achieve cost reduction across their core functions. from personalized customer services and consumer lending to fraud detection and financial crime monitoring. At the same time, the rapid development of AI-based technologies has introduced serious risks into the financial service space. The trans- excuse me, the Treasury Department, the Federal Reserve, and Consumer Financial Protection Bureau have all expressed concerns. Other financial regulators have repeatedly cautioned that the development of robust and trustworthy artificial intelligence is dependent on our ability to encourage innovation that maximizes oversight, consumer protection, data privacy, as well as workforce protection and marketplace fairness. In view of these considerations, I'm concerned by the Trump administration's decision to rescind some of the common sense federal directives that sought to advance the safe and responsible development of artificial intelligence. This includes the reversal of an executive order directing all federal agencies to enforce existing consumer protection laws and to develop additional regulatory safeguards against fraud, unintended bias, discrimination and privacy violations only when absolutely necessary. President Trump subsequently issued his own AI action plan, a strategy that largely reflects the divergent view that consumer protection stands as an impediment to AI innovation, a position with which I strongly disagree.
Regrettably, the AI action plan undermines state-level AI regulation by requiring federal agencies to, quote, consider a state's regulatory climate, close quote, when allocating funding, and to outstrip federal funds from any state with a regulatory framework that it considers burdensome. I would note that recent legislation to impose a 10-year moratorium on state AI regulation was soundly defeated in the U.S. Senate by an overwhelming bipartisan vote of 99 to 1. The AI action plan similarly impedes federal oversight of AI-based systems by directing the Federal Trade Commission to stand down from ongoing investigations that unduly burden AI innovation. It is the fundamental mission of the FTC to protect the American public from unfair or deceptive business practices. President Trump also recently issued an executive order to limit federal procurement of AI large language models to those that are developed with ideological neutrality, as reported by the independent Brennan Center for Justice. Compliance with the order will likely require technology companies to degrade model performance and undermine public trust in their technology. Not surprisingly, our committee has received regular reports from AI stakeholders who have put AI development on hold over concerns that their integration of fairness metrics will run afoul of the executive order. Innovation will also not be well served by the dismantling of the CFPB, a federal agency that has sought to advance the development of trustworthy AI systems and financial services through consumer protection enforcement actions and regulatory clarity. In stark contrast to these actions, the work of our bipartisan AI working group
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