Project Syndicate: Last November, you defended Gary Gensler, the chair of the US Securities and Exchange Commission (SEC), from “intense” industry pushback against his efforts to tighten regulation on some parts of the financial sector. Gensler recently testified before the House Financial Services Committee about the SEC’s enforcement strategy, including its attempted crackdown on digital assets. What is missing from the current US approach to such assets, and which steps are most urgently needed to avoid “letting people run de facto banks without proper supervision”?

Simon Johnson: The obvious issue that urgently needs to be addressed is stablecoins, which operate just like banks: The “coins” are demand deposits, which many holders feel are as good as cash, and the issuing entity holds assets. If those assets are stable in value and fully liquid, then redemption demands can be met. But any loss of asset value or impediment to liquidity, especially if it occurs amid a sharp market downturn, can trigger a kind of bank run. Recent experience with Silicon Valley Bank and other regional banks has reminded everyone how those work.

PS: In February, you and Daron Acemoglu highlighted the risks posed by artificial intelligence (AI), which is “being designed and deployed by corporate America in ways that will disempower and displace workers and degrade the consumer experience, ultimately disappointing most investors”. Since then, an open letter calling for a six-month (or longer) pause on advanced AI research has attracted more than 27,000 signatories, including many tech leaders. Do you think such a moratorium would make a difference in mitigating some of the risks you identify? If regulators were given six months to devise a framework to guide AI development, where should they start?