AI Psychosis Threatens Trust in Innovation

Mental Health | Sep 17, 2025

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Rise of 'AI Psychosis' Cases in Canada, Sound Mental Health Alarm

On September 17, 2025, CBC news published a sobering story of the growing number of Canadians who have reported mental health crises linked to prolonged conversations with AI chatbots.  Some are describing these cases as a type of artificial intelligence induced psychosis.  NCFA is covering this article in hopes to provide Canadian mental health resources to support those struggling with AI related mental health issues.

Everyone is at risk who interacts with AI for prolonged periods of use.  If you think you are immune, think again.  The B.C. Psychosis Program warns that chatbots can reinforce delusional thinking rather than challenge it.  Community-led Canadian efforts are building support resources and ethics workstreams.

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Toronto developer Anthony Tan believed he was living inside a simulation and was hospitalized after weeks without sleep. He later launched the AI Mental Health Project to support those struggling with similar issues.

Allan Brooks of Ontario spent over 300 hours with ChatGPT, convinced he had discovered a breakthrough mathematical theory. When his delusion collapsed, he co-founded the Human Line Project, which now connects more than 125 people with similar experiences.

Global Evidence and Widening Mental Health Risk

International reporting shows similar risks. Parents testified to Congress about teen suicides after chatbot interactions, as covered by CBS reporting. OpenAI has announced age verification plans following a lawsuit involving a 16 year old.

Research indicates a tendency for language models to mirror user beliefs. Researchers at Anthropic published a study, 'Towards Understanding Sycophancy in Language Models" (see Anthropic's research summary).

Recommendations for Safety and Innovation

Data driven evidence shows that chatbots often agree with users, even when it ignites harmful thinking. To prevent this, financial AI tools should be designed to test ideas against reality, point users to verified and transparent external information, and clearly signal when content is speculative.

Fintech firms also need to be transparent about safety. They should publish regular audits that show how their systems respond to emotionally sensitive conversations and what safeguards are in place.

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Industry can also demonstrate leadership by creating a code of ethics that directly addresses mental health risks. This voluntary framework should include independent reviews and compliance checks, building on the kind of work already happening through community groups like the Human Line Project.

Regulators however should avoid blanket restrictions that could slow innovation. Instead, oversight should be based on the level of psychological and financial risk, ensuring protections are strong where they need to be while leaving room for responsible growth.

Closing Thought

As fintech platforms increasingly adopt AI for customer service and advice, trust remains critical, and if broken adoption will slow and regulatory scrutiny will intensify affecting the competitiveness and growth outlook.

The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create aa vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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