The FCA Has a Point About AI and Crypto

The UK's Financial Conduct Authority has published a review titled "AI and the future of retail financial services". Among other things, it looks at the risks to the financial system that could emerge if AI agents are given autonomous control over tokenized assets.

I rarely agree with financial regulators when they talk about crypto, especially when they start listing crypto's supposed flaws. In my view, they usually invent those flaws or blow them way out of proportion. But this time, I'm fully on board with the FCA's assessment.

We all use AI models, and we all know they are just as capable of making mistakes as humans are. The difference is that humans are accountable for their own mistakes, while AI, for now, cannot be held accountable for anything.

The FCA is asking the right questions here:

• Who is liable when an AI agent causes financial harm?
• How do you prove that an agent acted within the scope of a user's consent?
• How do you revoke or limit an agent's authority?
• How do you audit what an agent actually did?
• How do you prevent fraud, manipulation, discrimination, and systemic failures?

All of these problems are easier to solve within traditional financial rails. PayPal, Visa, Mastercard, and now even banks in several countries can reverse a payment and refund the sender when something goes wrong. With crypto assets, that is a much harder problem.

When it comes to crypto for AI agents, I am personally much more drawn to Fartcoin. It was born out of jokes made by the AI bot Truth Terminal, created explicitly as a token with no underlying value, with a portion of the supply sent to that bot's wallet as a nod to its role in kicking off the whole joke-token idea. The bot can control those tokens and can even use them to pay someone if they are willing to accept that payment. But Fartcoin's value was never tied to any real-world asset.

Handing over management of tokens like Fartcoin to an AI is something you can actually feel comfortable with, and you can build all sorts of elaborate financial experiments on top of that. Anyone willing to trade full-fledged programmable money - stablecoins, or RWA tokens like tokenized gold - for Fartcoin can always swap any crypto asset for it on rabbit.io and take part in this wild AI economy.

But maybe it really is too early to build that kind of economy directly on tokens whose value is tied to the real world.