Artificial Intelligence, Financial Regulation and Capital Markets: An Australian Perspective with Japan and the United States as Benchmarks
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Artificial intelligence (AI) is rapidly transforming financial services and, in doing so, is exposing gaps between technological adoption and existing regulatory frameworks. This paper examines why the Australian Securities and Investments Commission (ASIC) has moved to provide guidance on AI use in financial services, and explores how different degrees of regulation—from none to very heavy—would shape market behaviour and systemic risk. Using Australia as the primary case, and Japan and the United States as benchmarks, the discussion considers AI both as an investment theme that challenges superannuation chief investment officers (CIOs) and as a potential investor or advisory agent in its own right. A qualitative, scenario-based analysis is used to reflect on implications for capital markets, volatility, portfolio composition and the risk of market failure. The paper argues for a balanced, principle-based regulatory approach that maintains innovation and efficiency while preserving market integrity and investor protection.Keywords: Artificial intelligence; financial regulation; ASIC; superannuation; systemic risk; market volatility; herding; governance; Australia; Japan; United States