The Bank for International Settlements (BIS) has released a new report titled “Artificial intelligence in central banking,” which delves into the use cases and risks associated with AI tools in the global central banking realm. The report warns banking regulators of the inherent risks associated with the emerging technology and provides valuable insights into the application of artificial intelligence by central banks.
Central banks have been early adopters of AI models for data collection, analysis, and decision-making. These models have proven to be valuable for tasks such as data sampling, cleaning, and matching, rendering human effort almost obsolete in the face of complex modern data. Additionally, central banks are utilizing AI-backed financial analysis to make decisions on monetary policy, using neural networks and random forest models to access real-time data for inflation expectations and obtain feedback on the efficacy of monetary policy.
The use cases of AI in central banking extend to the oversight and supervision of payment systems, where AI systems have shown proficiency in spotting irregular financial transactions to address issues such as money laundering and cyberattacks. Furthermore, central banks are deploying AI systems to predict borrowers likely to default on their loans and forecast consumer behavior in response to central bank digital currency (CBDC) launches.
However, the use of AI in central banking is not without risks. There is a concern about potential bias in AI models and the need for human supervision to reduce errors, especially in generative AI models.
In the face of these challenges, central banks will need to invest in equipping their staff with new AI skill sets and will face stiff competition from private financial firms in recruiting employees with advanced AI skills. Additionally, integrating an enterprise blockchain system is crucial for ensuring data input quality, ownership, and data security while also guaranteeing the immutability of data.
For those interested in learning more about the integration of AI and enterprise blockchain, CoinGeek offers coverage on this emerging technology and how enterprise blockchain will be the backbone of AI.
