The European Blockchain Observatory Forum (EUBOF), an initiative of the European Commission, published a report on May 24 calling on the European Union (EU) to prepare for the integration of blockchain technology with artificial intelligence (AI). The EU blockchain’s latest move is seen as a proactive approach to protecting user data.
The EU Blockchain Report, prepared by the Directorate-General for Communications Networks, Content and Technology, discusses the potential for integrating blockchain technology with AI, with a focus on blockchain's secure data storage and management capabilities, particularly in sensitive sectors such as healthcare and finance.
EU Blockchain Report Highlights DeFi as Emerging Trend
The report focuses on the concept of decentralized AI networks, which could bring about an end to the current centralized model dominated by large corporations and governments. By leveraging the decentralized nature of blockchain, these networks can foster collaboration and innovation among a wider range of participants.
The EU Blockchain Report also explored emerging Web3 trends, such as decentralized finance (DeFi) and the rise of smart contracts.
DeFi offers financial services without traditional intermediaries such as banks and is seen as a sector where a regulatory framework needs to be established to ensure consumer protection and financial stability.
The document also discusses smart contracts, which are self-executing agreements stored on the blockchain. The report highlights that advances in smart contract functionality are necessary to realize their full 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 sector.
Recall that the DeFi lending platform Sonne Finance suffered a major security breach on May 14, resulting in a loss of approximately $20 million.
Postmortem of Sonne Finance market abuse in Optimism https://t.co/gBXDsl8ucA
— SonneFinance (@SonneFinance) May 15, 2024
Similarly, Hundred Finance I encountered a similar issue 2023. In the Hundred Finance exploit, hackers exploited vulnerabilities by manipulating exchange rates, inflating the value of collateral, and then draining the lending pool with only a minimal amount of tokens.
Philosopher warns against unlimited integration of AI in finance
Experts and regulators are growing concerned about the potential impact of unrestrained integration of AI technologies in the financial sector.
Renowned philosopher Yuval Noah Harari spoke at the Bank for International Settlements (BIS) Innovation Summit on May 7th, sounding the alarm over the unlimited adoption of AI in the financial sector. He warned of the frightening possibility that AI could get out of control and lead to serious consequences, Recommended and effective regulations To reduce misuse and adverse events.
In January 2024, the U.S. Securities and Exchange Commission's (SEC) Office of Investor Education and Advocacy, in conjunction with the North American Association of Securities Commissioners and the Financial Industry Regulatory Authority, issued a joint alert warning investors about the rise of investment fraud linked to AI and other emerging technologies.
Earlier this month, SEC Chairman Gary Gensler expressed concerns about the potential impact of AI on the financial system, warning about issues such as AI washing and algorithmic bias.
Experts believe various global authorities will continue their efforts to mitigate AI risks, including ensuring that companies accurately represent their AI capabilities and the role of AI in their business.
