EUBOF Provides Guidance to EU on Integration of Blockchain and AI
The European Commission’s initiative, the European Blockchain Observatory and Forum (EUBOF), has released a comprehensive report urging the European Union (EU) to prepare for the integration of blockchain technology and artificial intelligence (AI). This proactive move by the EU’s blockchain sector aims to safeguard user data.
The report, prepared by the Directorate-General for Communications Networks, Content, and Technology, explores the potential integration of blockchain and AI. It highlights the secure data storage and management capabilities of blockchain, particularly in sensitive fields like healthcare and finance.
The EU blockchain report focuses on the concept of decentralized AI networks, which could disrupt the current centralized model dominated by large corporations and governments. By leveraging the distributed nature of blockchain, these networks can foster collaboration and innovation among a wider range of participants.
Additionally, the report delves into emerging trends in web3, including decentralized finance (DeFi) and advancements in smart contracts. DeFi, which provides financial services without traditional intermediaries, requires the establishment of regulatory frameworks to ensure consumer protection and financial stability.
The document also emphasizes the need for further advancements in smart contract functionalities to fully unlock their potential in various applications. Smart contracts are self-executing agreements stored on a blockchain.
The European Commission’s proactive approach to integrating blockchain and AI is strategic, particularly in light of recent security incidents in the cryptocurrency space. Notably, Sonne Finance, a DeFi lending platform, experienced a significant security breach resulting in a loss of approximately $20 million. Similarly, Hundred Finance faced a similar issue in 2023, with the hacker exploiting vulnerabilities to manipulate exchange rates and drain lending pools.
Concerns about the unrestrained integration of AI technology in finance have been raised by experts and regulatory bodies. Renowned philosopher Yuval Noah Harari, speaking at the Bank for International Settlements (BIS) Innovation Summit, cautioned against the uncontrolled deployment of AI in the financial sector. Harari emphasized the need for effective regulation to mitigate potential misuse and adverse events.
These concerns have prompted global authorities to take action. In January 2024, the US Securities and Exchange Commission (SEC) issued a joint alert with other regulatory bodies, warning investors about the rise of 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, highlighting the importance of addressing algorithm bias and other risks associated with AI.
It is expected that global authorities will continue their efforts to mitigate AI risks, ensuring transparency in companies’ representation of their AI capabilities and the role of AI in their businesses.