The phrase "highly fact-specific" is troublesome when used as to the application of any governmental power, including financial regulation. "Highly fact-specific" could wind up being eccentric and not based on principles that can be readily generalized.

FSOC is an agency made up of the members of a single political party. There are no minority party participants in the agency to voice dissent; that raises the risk of highly political decisions that are not readily subject to challenge…

While the de-banking of digital assets is a significant issue, the larger question concerns the ability of financial regulators to deal with innovation. We are many years into the advent of digital assets as a financial product, yet there has been little of no progress in modifying existing rules to fit the product. In general, when nonbanks have developed interesting retail lending products, the response of the regulators has been to bemoan that the products are not provided by more heavily…

The worry is that the regulators will make the same types of mistakes with the regulation of AI as regulators made with digital assets--fail to adopt regulations that are appropriate to the product. In the case of AI, the demand that developers fully understand the logic of the systems is not possible. AI is not simply a more complicated logic tree, like an expert system with multiple branches. Much of AI is, at least at this point in its development, inherently a black box. If the…

The regulators are clearly attentive to the problems besetting the digital asset markets, as those problems certainly make the case that the market cannot succeed without regulation. Unfortunately, the digital asset market cannot succeed without regulation that is tailored to the product, which none of the U.S. regulators (leaving aside SEC Commissioner Hester Peirce) seem interested in developing.  See, e.g., ; see also .

Not only are current regulatory requirements…