The European Blockchain Observatory and Forum (EUBOF), an initiative of the European Commission, released a report on May 24 calling on the European Union (EU) to ready itself for the integration of blockchain technology and artificial intelligence (AI). The latest move from the EU blockchain is seen as a proactive approach to secure users’ data.
The EU blockchain report, prepared by the Directorate-General for Communications Networks, Content, and Technology, discussed the potential integration of blockchain technology with AI. It emphasizes blockchain’s secure data storage and management capabilities, particularly in sensitive fields like healthcare and finance.
EU Blockchain Report Highlights DeFi as Emerging Trends
The report focused on the concept of decentralized AI networks, which could end the current centralized model dominated by large corporations and governments. By leveraging blockchain’s distributed nature, these networks could encourage collaboration and innovation among a broader range of participants.
The EU blockchain report also explored emerging trends in web3, such as decentralized finance (DeFi) and smart contract enhancements.
DeFi provides financial services without traditional intermediaries like banks and is seen as a sector where regulatory frameworks need to be established to ensure consumer protection and financial stability.
The document also discussed smart contracts, which are self-executing agreements stored on a blockchain. The report emphasized the need for advancements in smart contract functionalities to fully exploit their potential in various applications.
The European Commission’s proactive approach to blockchain and AI integration is seen as strategic, especially in light of recent security incidents in the cryptocurrency space.
Recall that DeFi lending platform Sonne Finance suffered a major security breach on May 14, resulting in a loss of approximately $20 million.
Post-mortem on the exploit of Sonne Finance markets on Optimismhttps://t.co/gBXDsl8ucA
— Sonne Finance (@SonneFinance) May 15, 2024
In a similar vein, Hundred Finance encountered a comparable issue in 2023. With the Hundred Finance exploit, the hacker exploited a vulnerability by manipulating the exchange rate, inflating the value of collateral, and subsequently draining the lending pools with only a minimal amount of tokens.
Philosopher Cautions the Unrestrained Integration of AI in Finance
Experts and regulatory bodies have expressed growing concerns about the potential implications of unrestrained integration of AI technology in finance.
Renowned philosopher Yuval Noah Harari spoke at the Bank for International Settlements (BIS) Innovation Summit on May 7, cautioning against the unrestrained deployment of AI in the financial sector. He warned of the grim potential for AI to spiral out of control, leading to severe consequences, and recommended effective regulation to mitigate misuse and adverse events.
In January 2024, the US Securities and Exchange Commission (SEC) Office of Investor Education and Advocacy, along with the North American Securities Administrators Association and the Financial Industry Regulatory Authority, issued a joint alert warning investors about the rise in investment frauds involving AI and other emerging technologies.
Earlier in January, SEC Chair Gary Gensler expressed concerns about the potential AI impact on financial systems as he warned against AI washing, algorithm bias, and more.
Experts believe that various global authorities will continue their efforts to mitigate AI risks. This includes ensuring that companies accurately represent their AI capabilities and the role of AI in their businesses.
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