Where to draw the lines to all the other regulations that provide for product safety of compound products that include AI?
Abstract
In this project we are talking about the artificial intelligence and blockchain which are referred as emerging technologies. We look at how those technologies affect current and upcoming cyber policies and laws from the perspective of three countries, which are: UAE, USA, and EU. Moreover, we consider how these three countries provide the support for the regulation of those emerging technologies. Apart from that in this project we mention how national regulations comply to a framework of public international law, and how could they be adoptive with other regulations. We also considered the role of private sector and what effects do these regulations on emerging technologies make on social and human rights. All of the mentioned points above were considered from the finance field perspective.
Introduction
Artificial intelligence (AI) is a modern technology that is capable of simulating human intelligence and learning process. There are hundreds of different areas where AI can be and is already being applied. The reason of why this is such a popular technology is unlimited possibilities that can be implemented with AI. This is a very fast growing technology and as it develops, policies and laws about this technology should be also up to date. This is creating a challenge for courts and legislators, for they have to adapt laws and have a clear picture of what could be a potential violations and misusing cases of this technology. Apart from AI, there is also one more technology to be considered which is called blockchain, which in simple words stands for a distributed ledger and provides a great assurance of integrity of data stored in each block. Blockchain deals with finance information and related to the cryptocurrency, which is also viral nowadays. Some old fashioned laws cannot be applied for crimes related to the cases that involve the presence of one of those emerging technologies. We are going to look at what support USA, EU, and UAE can provide for regulating these technologies and later on make our own observations and recommendations about emerging technologies and policies and laws for them.
EU
Concerning the development of AI and blockchain technologies, European Union is looking forward to these technologies to take their place in the digital world. However, with the development of these technologies, there is a need for new regulations on them. European Union effectively estimates the changes that these technologies will bring to the finance field especially blockchain technology. Nevertheless, there is a challenge that the EU’s commission has to face, which is a balance between support of technology and business innovation, and the security of individuals. European Union is supporting the idea of developing these technologies, yet they are also taking into consideration the way of conducting these developments. For example, the stated priority for their commission is “to ensure that the EU financial services regulatory framework should be innovation-friendly and should not pose obstacles to the application of new technologies” (Cryptoassets and artificial intelligence in EU regulation). Therefore, the EU has taken all the risks into account and legislators issued regulations in the field of cyberspace and data digitalization. These regulations are:
the implementation into national laws of the EU Directives on Digital Content as well on Modernization of Consumer Protection – the former addressing B2C contracts for the supply of digital goods and services, and the latter invigorating consumer rights in e-commerce;
the consultation on the Digital Services Act as well as on the Digital Market Act, both of which are intended to provide an up-to-date framework for the operation of internet platforms and to replace the 20-year-old, veteran e-Commerce Directive;
the presentation of a Data Governance Act as part of the Commission’s European Strategy for Data – intending to create a uniform ecosystem for the handling of all personal and non-personal data;
the adoption of a Cyber Security Strategy that sets the framework for the protection of EU citizens and businesses against cyber threats and that promotes information systems that are both, open and secure;
the propagation of industry-specific initiatives, such as the draft Regulation on Digital Operational Resilience for the Financial Services Sector that aims to bolster trust in the technology systems of financial service providers and has proposed that significant providers of those systems come within the ambit of the financial services regulators.
In general, European Union is aware of the pace of development of these technologies. Since AI and blockchain are already in use, they demand that legislators be educated about the impact on the financial field that is made by these technologies before attempting to develop a comprehensive legal framework.
One of the drafts on Regulation on Markets in Crypto-Assets (MiCA), which was written on 24 September 2020, tackles the question of the impact on the financial market by emerging technologies (Cryptoassets and artificial intelligence in EU regulation). This draft includes the risk assessment that is brought by emerging technologies created for the digital market and recommendations that state the importance of preserving consistency with other policies. Some of the questions that were raised in that proposal include:
Is it really appropriate to take all crypto assets that qualify as either financial instruments or e-money under existing EU legislation out of MiCA’s scope of application? Does MiCA’s subsidiary nature correspond to the specific and somewhat unique legal challenges that are common to all blockchain-based assets?
Is there an over-regulation for crypto asset service providers, making it unattractive to operate these activities in the EU? Will that create a competitive disadvantage vis-à-vis those countries that take a more flexible approach?
Is the balance right between the detail of regulation for some tokens, such as stable coins, on the one side and some other tokens that are hardly specified at all, such as currency or non-fungible tokens?
That indicates the perspective of the European Union, which states the priority of security of citizens and at the same time encouragement of safe approach towards improving the current regulations on the digital market regarding blockchain.
Considering the AI, there is another proposal “Laying down harmonized rules on artificial intelligence and amending certain union legislative acts”, written on 21 April 2021, which covers all AI that make an impact on the EU (Cryptoassets and artificial intelligence in EU regulation). This proposal prohibits some types of AI that deal with biometric recognitions and qualifies them as “high-risk AI”. Some of the questions raised in that proposal:
Are the comprehensive obligations imposed on AI providers putting European business at a competitive disadvantage in comparison to those in all other regions – none of which provides for such a set of stringent and comprehensive requirements?
Is there an under-regulation with regard to most pressing legal question relating to AI: who is responsible if something goes wrong? How should an adequate liability scheme look like?
Where to draw the lines to all the other regulations that provide for product safety of compound products that include AI?
Does the wide geographic application make sense? Does it create a workable framework to enforce the wide-ranging obligations under the Regulation?
European Union has established its position regarding emerging technologies and their impact on laws and legislators. The main priority remains the security of the citizens and reasonable approaches towards new amendments on laws regarding AI and blockchain technologies.
