The European Blockchain Observatory and Forum (EUBOF) recently released a report urging the European Union (EU) to prepare for the integration of blockchain technology and artificial intelligence (AI) to secure users’ data. The report emphasizes blockchain’s secure data storage capabilities, particularly in sensitive fields like healthcare and finance. It discusses the potential integration of blockchain technology with AI and highlights the concept of decentralized AI networks, which could encourage collaboration among a broader range of participants.
The report also explores emerging trends in web3, such as decentralized finance (DeFi) and smart contract enhancements. DeFi offers financial services without traditional intermediaries like banks and requires regulatory frameworks to ensure consumer protection and financial stability. Smart contracts, self-executing agreements stored on a blockchain, are also mentioned, with the need for advancements in their functionalities to fully exploit their potential in various applications. The European Commission’s proactive approach to blockchain and AI integration is considered strategic, especially in light of recent security incidents in the cryptocurrency space, such as the Sonne Finance security breach.
Concerns about the unrestrained integration of AI in finance have been raised by experts and regulatory bodies due to potential implications. Renowned philosopher Yuval Noah Harari cautioned against the unrestrained deployment of AI in the financial sector at the Bank for International Settlements (BIS) Innovation Summit. He warned of the potential for AI to spiral out of control and called for effective regulation to mitigate misuse and adverse events. In January 2024, the US Securities and Exchange Commission (SEC) and other regulatory bodies issued a joint alert warning investors about the rise in investment frauds involving AI and other emerging technologies.
SEC Chair Gary Gensler has also expressed concerns about the potential impact of AI on financial systems, warning against AI washing, algorithm bias, and more. Experts predict that global authorities will continue their efforts to mitigate AI risks by ensuring companies accurately represent their AI capabilities and the role of AI in their businesses. This proactive approach by regulatory bodies reflects a growing awareness of the potential risks associated with the integration of AI technology in various sectors, including finance.
With the increasing integration of blockchain technology and AI, the European Union and other regulatory bodies are recognizing the importance of establishing regulatory frameworks to ensure data security and consumer protection. The proactive stance taken by the European Commission in promoting collaboration and innovation through decentralized AI networks and exploring emerging trends in DeFi and smart contracts demonstrates a forward-thinking approach to technology integration while addressing potential risks. By monitoring and regulating the deployment of AI in finance and other sectors, regulatory bodies aim to mitigate risks and safeguard against potential misuse and adverse events.
