ReportWire

Tag: regulations

  • Roughly 70% of Crypto Communications Violate FINRA Rules: Report

    Roughly 70% of Crypto Communications Violate FINRA Rules: Report

    The United States Financial Industry Regulatory Authority (FINRA) has revealed that about 70% of retail communications concerning cryptocurrencies violate its rule of misleading claims.

    According to an official report, FINRA identified communications that failed to provide sound bases for evaluating digital assets by excluding explanations of how they are issued, held, transferred, and sold.

    Misleading Crypto Communications

    FINRA’s findings come from an exam launched in November 2022, which targeted crypto firms that actively communicate with retail investors over crypto assets and related services to evaluate their practices.

    The financial regulator assessed over 500 communications distributed by member firms concerning assets offered by affiliates or third parties for compliance with FINRA Rule 2210.

    The FINRA Rule 2210 prohibits false, exaggerated, promissory, unwarranted, or misleading communications and is also against the omission of information that would cause a communication to be deceptive. The rule requires that broker-dealer communications with the public be fair and balanced.

    Among other things, FINRA discovered a failure to differentiate in communications, crypto products, and services offered through an affiliate or the member itself. A vast majority of the communications were inconsistent with FINRA Rule 2210.

    FINRA’s Recommendations

    The financial authority found false statements or implications that cryptocurrencies functioned like fiat or equivalent instruments. Some firms likened crypto to other assets like stock investments, omitting a sound basis to compare their different features and risks.

    On top of that, the examined companies misled investors to believe that the protections of the federal securities laws, the Securities Investor Protection Corporation (SIPC) under the Securities Investor Protection Act (SIPA), and FINRA rules applied to crypto assets.

    FINRA discovered an abundance of unclear and misleading explanations of how crypto works, including its core features and risks.

    The regulatory authority recommended considerations for fair and balanced communications, including information about the volatility, the potential for investors to lose their entire portfolio, and the extent to which protections from designated agencies will apply.

    “Member firms may consider the information in this update in developing new, or modifying existing, policies and procedures that are reasonably designed to achieve compliance with relevant regulatory obligations based on the member firm’s size, business model, or practices,” FINRA advised.

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  • Letters: What marijuana regulation? We purchased a biscotti-flavored vaporizer with THC potency of 84.9%. – The Cannabist

    Letters: What marijuana regulation? We purchased a biscotti-flavored vaporizer with THC potency of 84.9%. – The Cannabist

    Marijuana regulations don’t seem overly complex

    Re: “Colorado paved the way, and sky didn’t fall,” Dec. 31 news story

    I read with interest the article about the 10-year wild ride of marijuana legalization and was intrigued by the comment by Truman Bradley, executive director of the Marijuana Industry Group, a business trade association.

    Read the rest of this story on DenverPost.com.

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  • These Crypto Exchanges Are Navigating New UK Rules as January 8 Deadline Nears

    These Crypto Exchanges Are Navigating New UK Rules as January 8 Deadline Nears

    Several crypto exchanges are taking steps to adhere to recently imposed regulations by the UK government. These regulations require crypto entities to inform users about the risks associated with trading digital assets and to promote their services responsibly.

    These measures have been implemented as part of the Financial Services and Markets Act in the UK, which has expanded its scope to include firms dealing with crypto and stablecoins, subjecting them to the same regulatory standards as traditional financial services.

    Adapting to UK Regulations

    In the case of Coinbase’s UK users, compliance involves disclosing their investor type and completing a form confirming their understanding of the high-risk nature of crypto investments, aligning with guidelines from the UK Financial Conduct Authority (FCA). In an email to its UK users, Coinbase has made it clear that both tasks must be completed to retain access to their accounts.

    A similar approach was taken by the Seychelles-based OKX, which issued a statement on January 2 stating its intention to implement new requirements in compliance with rules set by the UK’s regulator. Starting from January 8, UK users on OKX will be required to complete two questionnaires.

    The first questionnaire aims to ensure users are informed about the risks associated with crypto investments and will categorize users based on their investor profiles. The second questionnaire will inquire about users’ knowledge and experience in crypto investing to assess their understanding of certain topics and associated risks.

    Users failing to complete these tasks risk losing access to their accounts.

    Besides Coinbase and OKX, Crypto.com and Gemini have also expressed their commitment to meeting UK investor protection standards and ensuring that customers understand the risks involved in investing in crypto, the report said. They are actively working with local regulators to provide the necessary knowledge for users to make informed investment decisions.

    Significance of January 8

    The significance of January 8 lies in the fact that individuals using these platforms are obligated to complete a declaration detailing their investor profile and participate in a questionnaire focusing on financial services and regulations. This declaration requires users to identify themselves as either high-net-worth individuals or restricted investors, depending on specific criteria.

    The ultimate objective of these procedures is to promote responsible trading and protect investors. As such, crypto firms are required to secure authorization or registration from the Financial Conduct Authority (FCA) to promote cryptoassets to retail customers.

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  • 3 Ways Businesses Are Staying Ahead of Regulatory Changes in 2024 | Entrepreneur

    3 Ways Businesses Are Staying Ahead of Regulatory Changes in 2024 | Entrepreneur

    All around the world, regulatory bodies are constantly creating and revising laws and making regulatory changes that govern businesses operating in specific industries. While most of these laws are only applicable to large corporations that meet specific requirements, sometimes they apply to smaller businesses, too. That’s why it’s important to have a strategy for remaining in compliance with all applicable laws. It’s just not possible to stay on top of ever-changing industry regulations manually.

    The consequences of non-compliance are steep

    According to data published on FintechFutures.com, the first two quarters of 2023 saw more than $3.7 billion in financial enforcement fines. A French ad company called Criteo was fined 40€ million for violating the GDPR by not getting user consent for targeted advertising. The original fine was 60€ million, but the company sought to get it reduced. Other companies in varying industries have also been hit with steep fines, and the only way to avoid this situation yourself is to stay on top of compliance requirements.

    Kimberly Zhang

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  • SBF's Conviction, SEC's Legal Defeats Against Ripple, Binance's New CEO: Major Crypto Events That Dominated 2023

    SBF's Conviction, SEC's Legal Defeats Against Ripple, Binance's New CEO: Major Crypto Events That Dominated 2023

    What an eventful year it has been for the crypto industry!

    With 2023 coming to an end, the cryptocurrency space has had its share of battles and victories, all of which continue to shape an industry that, though still growing, has managed to make a mark in the global financial sector.

    This year, regulators came down hard on key players in the market, one of the biggest and most influential CEOs pleaded guilty to a criminal charge, and the hype around a spot Bitcoin exchange-traded fund (ETF) intensified following applications from major financial institutions.

    We now go further to explore some of the major events that made headlines in 2023.

    Bank Collapses That Affected Crypto Companies

    Silicon Valley Bank (SVB), Signature Bank, and Silvergate, which catered to crypto businesses and tech startups, fell apart within a week in March in what was described as one of the major collapses to rock the American banking sector.

    It all started with Silvergate Bank, which revealed that it was struggling to stay in operation after reporting a $1 billion loss in the fourth quarter of 2022 following the collapse of the once-cryptocurrency exchange giant FTX. Days after, the financial institution announced the closure of its Silvergate Exchange Network (SEN) – an instant settlement service that allowed crypto clients to make payments 24/7 – stating that the move was a “risk-based decision.”

    Silvergate eventually went into voluntary liquidation even though it was solvent. Amid the bank’s crisis at the time, crypto heavyweights, such as Huobi and Coinbase, cut ties with Silvergate. A few days later, the California Department of Financial Protection and Innovation closed down SVB, which mostly served the tech industry, becoming the largest bank in the United States to fail after Washington Mutual Bank in 2008.

    SVB experienced a bank run after depositors made huge withdrawals. Furthermore, banking Regulators shut down the crypto-friendly Signature Bank, which saw panic from customers after SVB’s fall, resulting in major stock sell-offs and massive outflows.

    The collapses, meanwhile, had a significant impact on crypto companies, with one of the biggest clients being Circle. The USDC stablecoin issuer revealed that it held part of its cash reserves in various US financial institutions, including SVB, Silvergate, and Signature banks, with over $3 billion in SVB.

    The USDC temporarily depegged as a result of SVB’s failure. Other crypto companies that had exposure to SVB and Signature included Ripple, BlockFi, Coinbase, and Paxos.

    The Inscriptions Craze

    First started on the Bitcoin network, the inscription mania also found its way to Ethereum and Ethereum Virtual Machine (EVM) chains.

    Inscriptions, simply put, are data files embedded on the blockchain. The fad started on the Bitcoin blockchain with Bitcoin Ordinals, which, similar to non-fungible tokens (NFTs), can be inscribed on a satoshi – the smallest denomination of Bitcoin (BTC).

    The ordinals craze prompted a surge in transactions on the Bitcoin network. But the trend has also caused network congestion, along with high fees.

    Meanwhile, inscriptions went beyond the Bitcoin network when developers found a way to deploy inscriptions on Ethereum and other blockchains beginning in November. Inscriptions on Ethereum and EMV-compatible chains are embedded in transaction call data.

    According to data from Etherscan in December, a spike in transaction activity on EVM chains was majorly attributed to inscriptions.

    However, Bitcoin Ordinals, especially, have not been without criticism, with maximalists labeling the trend as spam and a scam. Bitcoin Core developer Luke Dashjr stated that Ordinals creators were exploiting a vulnerability in Bitcoin Core to spam the blockchain. The developer also believes that ordinals are an attack on Bitcoin.

    Binance and Coinbase Slammed With SEC Lawsuit

    In June, the US Securities and Exchange Commission (SEC) went after two of the biggest cryptocurrency exchanges – Binance and Coinbase. According to the regulator, in its lawsuits against both companies, which were each filed within 24 hours, both firms violated securities laws and offered assets for trading deemed as securities.

    However, Binance and Coinbase denied the SEC’s claims, with both exchanges seeking to dismiss the regulator’s lawsuits. Binance.US, the American affiliate of the international exchange Binance, trimmed down its workforce as the company anticipated a long and expensive legal battle with the SEC.

    Ripple’s Victories Against the SEC

    A month after the SEC’s lawsuit against Binance and Coinbase, another crypto company, which has been involved in a lengthy legal fight with the regulator, scored a major win in July.

    In December 2020, the SEC sued Ripple Labs, the company behind the XRP token, for conducting a $1.3 billion unregistered securities offering through its sale of XRP. Ripple and its CEO, Brad Garlinghouse, fought back against the allegation, maintaining that the firm did not commit any crime.

    A partial victory came for Ripple in July 2023 after Judge Analisa Torres ruled that XRP sales on public crypto exchanges did not violate securities laws. However, Judge Torres stated that the sale of XRP directly to sophisticated investors violated securities laws.

    Ripple scored another win in October after Judge Torress dismissed the SEC’s appeal against the judge’s decision in July. A third victory came for the company in the same month after the securities watchdog dropped its charges against Ripple’s top executives — Brad Garlinghouse and Chris Larsen.

    BlackRock’s Spot Bitcoin ETF Filing

    BlackRock, the world’s largest asset manager with nearly $10 trillion in assets, made headlines in June after the company filed for a spot Bitcoin exchange-traded fund (ETF) with the SEC. Following BlackRock’s filing, other companies such as Fidelity Digital, WisdomTree, Invesco, and VanEck resubmitted their applications.

    The SEC has yet to approve any spot Bitcoin ETF in the United States, with the regulator only favoring Bitcoin futures ETFs. However, there have been renewed hopes of a possible spot BTC ETF, with reports stating that discussions between potential issuers and the SEC have reached an advanced stage.

    Meanwhile, ETF applicants, investors, and the broader crypto community have set their sights on deadlines between Jan. 5th and 10th, 2024 deadline, with the hope the US will finally have a spot Bitcoin ETF product after years of delays and rejections.

    Worldcoin: The Crypto Iris-Scanning Project

    Worldcoin, co-founded by OpenAI CEO Sam Altman, launched its WLD token in July 2023. However, the project has faced criticisms for its iris-scanning feature, which users will undergo to get WLD tokens.

    Regulatory authorities in France, the United Kingdom,  Germany, and Argentina raised privacy concerns and initiated investigations into the project. Kenya, on the other hand, suspended Worldcoin activities in the country.

    Amid regulatory scrutiny, recent reports stated that Worldcoin quietly discontinued its orb verification for offline users in India, Brazil, and France. Meanwhile, the project expanded into Singapore, allowing users to “verify their unique humanness at an Orb.”

    Grayscale’s Win Against the SEC

    After its defeat to Ripple, the SEC suffered another loss in a legal case involving asset management firm Grayscale. The latter sued the Commission for rejecting its request to convert its Grayscale Bitcoin Trust (GBTC) into a spot Bitcoin ETF.

    In August, a United States court instructed the regulator to reconsider Grayscale’s application, a ruling that served as a major win for the crypto company. However, some experts at the time noted that the victory did not mean an automatic endorsement of spot Bitcoin ETF.

    Sam Bankman-Fried: From Crypto Darling to Criminal

    November can be said to be one of the most eventful months in 2023 for the cryptocurrency industry. Sam Bankman-Fried, popularly known as SBF, whose company FTX fell in November 2022, was convicted nearly a year later of a seven-count charge, including fraud and conspiracy.

    Following FTX’s collapse, Bankman-Fried resigned from his position as CEO of the crypto exchange. The former chief was subsequently arrested and later extradited to the United States.

    After a month-long trial, which began in October 2023, a 12-man jury declared SBF guilty of all seven counts involving fraud, conspiracy, and money laundering, with the charges carrying a combined maximum sentence of 120 years in prison. Following the guilty verdict, Bankman-Fried’s defense lawyer said that his client maintained his innocence and would continue to fight the allegations.

    SBF’s sentencing is scheduled for March 28, 2024, with a second trial also to happen in the same month. However, a recent letter, according to Bloomberg, revealed that Bankman-Fried will not face a second trial, with US prosecutors informing Judge Lewis Kaplan of their intention to drop the second set of charges, part of which accuse the former entrepreneur of bank fraud, trying to bribe foreign officials, and operating an unlicensed money transmitting business.

    CZ Stepping Down and Binance’s $4 Billion Fine

    Another major event happened in November, with the largest cryptocurrency exchange by market capitalization, Binance, paying a $4.3 billion fine in a settlement with United States regulators.

    The company, which is facing regulatory issues from different watchdogs, chief among them the SEC, paid the hefty settlement., in addition to pleading guilty to various charges, including knowingly violating the Bank Secrecy Act.

    Binance CEO Changpeng Zhao, popularly known as CZ, also pled guilty to contravening the Bank Secrecy Act, agreed to step down from his position and pay a personal fine of $50 million.

    Meanwhile, CZ, who also resigned as chairman of the board of directors at Binance.US, will remain in the U.S. until his sentencing on Feb. 23, 2024, with a United States district court ruling in favor of the government, which claimed that he was a flight risk.

    Binance’s former head of regional markets outside the U.S., Richard Teng, became the company’s new CEO.

    Major Hacks in 2023

    While hacking incidents in 2023 recorded less volume compared to 2022, there were still some notable hacks that occurred this year.

    DeFi lending protocol Euler Finance lost $197 million worth of customer assets in March through a flash loan attack. In April, the project announced that the attacker returned all recoverable funds.

    Crypto exchange Poloniex also fell victim to a hacking incident, causing the platform to lose $125 million in various assets, including Ether (ETH), USDT, USDC, and Shiba Inu (SHIB).

    Another project, Mixin Network, suffered a $200 million loss in September after attackers exploited a vulnerability in the database of its cloud service provider. Shortly after the attack, the Mixin team appealed to the hacker to return the stolen funds while offering them a $20 million bug bounty reward.

    Fingers Crossed for 2024

    With 2024 just around the corner, the industry seems to be optimistic about a potential crypto bull run. Already, there have been massive Bitcoin (BTC) price predictions for 2024, which analysts and stakeholders believe will be propelled by a potential spot Bitcoin ETF approval and the upcoming Bitcoin halving event.

    Bitwise recently predicted that BTC’s price will hit a new all-time high of $80,000 in 2024. Other predictions put the value of the crypto asset at $100,000 and above per coin also in 2024.

    It remains to be seen how the new year will shape the crypto industry, with various activities and anticipations, but hopefully, the leap year will be good for the market.

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  • A timeline of what's happened since Colorado's first legal recreational marijuana sales began – The Cannabist

    A timeline of what's happened since Colorado's first legal recreational marijuana sales began – The Cannabist

    It’s been 10 years since Colorado launched the first legal recreational marijuana market in the world and became a pioneer in drug reform.

    But when it came to the nascent industry, the first sales on Jan. 1, 2014, were more a starting block than a finish line.

    In the decade since legalization, Colorado has refined laws, catalyzed new ones and served as a litmus test for the rest of the country as states followed its lead. Today, cannabis is recreationally available for sale in 24 states — where more than half of Americans live.

    Read the rest of this story on DenverPost.com.

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  • The first 10 years of legal marijuana in Colorado were a wild ride. What will happen in the next decade? – The Cannabist

    The first 10 years of legal marijuana in Colorado were a wild ride. What will happen in the next decade? – The Cannabist

    The world’s first legal sale of recreational marijuana happened in Denver on Jan. 1, 2014. In fact, it happened twice.

    Mason Tvert was managing the onslaught of media that descended on the Mile High City to witness the historic moment, set in motion by the successful legalization campaign he’d led. So many camera crews and reporters showed up that morning that Tvert decided to rotate two groups through the dispensary’s sales floor — with each transaction billed as the first time anyone 21 or older could legally buy weed simply by walking into a store, showing ID and paying for it, no doctor’s note necessary.

    Cannabis enthusiasts also flocked to downtown Denver that day. Lines outside the new rec stores stretched down city blocks. Buyers exited with purchases in hand, holding them overhead like victory trophies. Rumors even swirled that some stores had sold out, only adding to the fervor.

    Read the rest of this story on DenverPost.com.

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  • 3 Big Cryptocurrency Things to Watch Out for in 2024

    3 Big Cryptocurrency Things to Watch Out for in 2024

    As the crypto industry expands, the community stays on the lookout for significant events that can affect the growth trajectory of the ecosystem. From the look of things, 2024 happens to be full of them.

    One such event is the creation and implementation of clear crypto regulations in major regions like the European Union. The crypto community is also watching out for the approvals of several Ethereum exchange-traded products and the jail sentencing of the FTX founder and former CEO, Sam Bankman-Fried (SBF), who perpetrated one of the largest financial frauds in modern history.

    Europe’s MiCA Implementation

    Years after the crypto industry’s incessant request for clear policies, the EU unveiled the Market in Cryptoassets (MiCA) regulation. This framework would set stringent rules to prevent the mass collapse of crypto firms, as seen last year.

    The European Commission introduced MiCA in September 2020 following two years of groundwork. The rules seek to govern the issuance and provision of crypto services while protecting the sector from fraudulent activities.

    The EU Parliament voted 517-38 in favor of the MiCA in April, while the EU Council, comprising 27 member states, unanimously approved the new licensing policy in May.

    The regulation will be implemented in two stages: the stablecoin rules will come into effect on June 30, 2024, and the rest will be applied on December 30, 2024. Implementing the new regulations could encourage other regions to set clear laws for the crypto industry.

    Ether ETF Approval

    While the crypto industry anticipates the approvals of several spot Bitcoin exchange-traded funds (ETFs) by January, there is also an expectation of regulatory nods for Ethereum ETFs between February and May.

    Several firms, including Ark Invest/21Shares, VanEck, Hashdex, Invesco/Galaxy Digital, and Grayscale Investments, have submitted applications with the U.S. Securities and Exchange Commission (SEC) to launch spot and mixed ETFs.

    The approval of the products could give investors wider access to the Ethereum ecosystem, giving room for more fund inflows.

    SBF’s Sentencing

    Another big thing to be excited about in 2024 is SBF’s sentencing scheduled for March. After roughly four hours of deliberations, a jury found the disgraced crypto mogul guilty of seven charges, including wire fraud, securities fraud, commodities fraud conspiracy, and money laundering conspiracy.

    SBF commingled user assets and defrauded investors of billions of dollars while marketing his crypto empire as a haven for customers. FTX’s implosion in November 2022 triggered a contagion that dragged other firms to their demise. While the exchange searches for a suitable bankruptcy exit route, SBF faces a maximum of 115 years in prison.

    If you want to see Bitcoin-centered big things to happen next year, please review this article.

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  • Brazilian Lawmakers Approve 15% Tax for Cryptocurrencies on Offshore Exchanges

    Brazilian Lawmakers Approve 15% Tax for Cryptocurrencies on Offshore Exchanges

    The Brazil Senate has approved new rules that will mandate locals to pay up to 15% tax on income generated from cryptocurrencies on offshore exchanges.

    According to a live recording from the Federal Senate, the new rule applies to crypto users with assets worth more than R$6,000 ($1,200) on all offshore exchanges.

    Brazilian Crypto Users to Pay 15% Tax

    The proposed bill has gained approval from the Chamber of Deputies and the Senate’s Economic Affairs Committee. It is on its way to being greenlighted by President Luiz Inácio Lula da Silva. The president’s approval is expected to come quickly as his administration initiated the proposal.

    The new bill classifies crypto assets and wallets on offshore platforms as financial investments and will subject them to the latest tax rules in accordance with the regulations of the Special Secretariat of the Federal Revenue of Brazil.

    In addition to cryptocurrencies, the bill also affects exclusive funds – investment funds with a single shareholder – and offshore applications, which are abroad companies that invest in the local financial market.

    The rule will become effective from January 1, 2024. Income on assets accessed before December 31, 2023, will be taxed at 8%, while funds earned before January will be taxed when accessed.

    Brazil to Raise $4B By 2024

    Brazil’s central bank has found that Brazilians have roughly R$200 billion (more than $40.7 billion) in offshore assets, the majority of which are investment funds and stakes in companies. With the new tax rules coming into effect, the government looks to raise R$20.3 billion ($4.1 billion) in 2024 and R$54 billion ($11 billion) by 2026.

    Notably, some members of the Senate opposed the bill. Senator Rogério Marinho said the proposed tax rule proved that the government used outdated techniques and created taxes to hide its inefficiency in managing the economy.

    Although several deputies have proposed changes to the bill, the alterations are yet to be implemented.

    The latest development comes less than six months after the president empowered the central bank to supervise the local crypto sector alongside the Comissão de Valores Mobiliários – Brazil’s Securities and Exchange Commission, which oversees coins classified as securities.

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  • Hong Kong Regulators Speed up Crypto Products Approval Following JPEX Fiasco

    Hong Kong Regulators Speed up Crypto Products Approval Following JPEX Fiasco

    BC Technology Group, the parent company of Hong Kong’s publicly listed crypto exchange platform OSL, noted that Hong Kong regulators were swiftly approving cryptocurrency products after the scandal that rocked the digital asset exchange JPEX.

    Another fintech provider stated that the participation of banks in the virtual assets sector in Hong Kong will facilitate mass adoption and development.

    Crypto Approvals Improve After JPEX, Says OSL Executive

    While Hong Kong authorities have increased regulatory scrutiny on the local industry after the JPEX saga, it appears they have also accelerated approvals of crypto-related products, according to Davin Wu, the chief financial officer at BC Technology Group.

    The JPEX mess started with a warning from the Hong Kong Securities and Futures Commission (SFC) in September 2023, stating that the crypto exchange made false claims about its licensing status.

    While the firm denied the allegations, JPEX eventually shut down operations in Hong Kong, citing a liquidity crisis. The platform was also suspected of rug pulling and faced money laundering accusations, with authorities making multiple arrests and conducting seizures.

    Wu, meanwhile, stated that the JPEX saga has caused authorities to increase its monitoring of non-compliant digital asset trading platforms, adding that regulators could prevent such entities from aggressively publicizing their services at places such as MTR Stations, as they did in the past.

    As previously reported by CryptoPotato, the SFC, in conjunction with law enforcement officials, set up a task force to monitor and investigate crypto trading platforms for illegal activities.

    Banks’ Involvement in Virtual Assets Could Accelerate Adoption

    According to Chen Yaowen, chief digital director and financial innovation director at fintech firm Sifang Innovative Hong Kong, banks could play a crucial role in the development and adoption of virtual assets in the city-state.

    Yaowen opined that if banks get involved in crypto, it could prove beneficial for the industry, considering the level of trust the public has in such traditional financial institutions. Also, Yaowen predicted that banks could develop tokenized virtual assets and store them in custody wallets in the future.

    The executive further said that the China Securities Regulatory Commission’s participation in the review and approval process of virtual assets could serve as a boost for the sector in Hong Kong.

    In June, the Hong Kong Monetary Authority (HKMA) urged banks to accept crypto businesses as clients, after the local financial institutions were reported to be hesitant about engaging exchanges.

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  • US CFTC Cracks Down on Crypto Exchanges Violating Trading Laws

    US CFTC Cracks Down on Crypto Exchanges Violating Trading Laws

    Following the conclusion of the extensive investigation and pursuit of cryptocurrency exchange giant Binance, reports suggest that the U.S. Commodity Futures Trading Commission (CFTC) now intends to pursue other platforms that violate trading laws.

    Despite experiencing a significant unforeseen event, the cryptocurrency industry has effectively mitigated the impact and is now observing signs of price recovery.

    CFTC to Intensify Crypto Crackdown

    Binance, the world’s largest crypto exchange by trading volume, settled with the US Department of Justice earlier this week without admitting guilt, but it had to pay a large fine of $4.3 billion. In this same case, the former Binance head Changpeng Zhao also pled guilty to the charges against him, including breaching the anti-money laundering law, effectively resigning from his position as the CEO.

    Following the recent mind-boggling events, reports suggest that the coming years will likely be challenging for crypto.

    After the events, CFTC Commissioner Christy Goldsmith Romero highlighted that there would be zero tolerance for any attempts to bypass the KYC rules. Romero declared, emphasizing the agency’s determination, “There are no pirate ships in U.S. markets” and “access to U.S. customers is a privilege, not a right.”

    This aggressive crackdown affects both domestic and alien companies alike. Commissioner Caroline D. Pham noted, “It should be crystal clear that the CFTC will not stop in its pursuit of non-U.S. entities.”

    As the CFTC seemingly increases its efforts against crypto projects, the SEC, America’s securities watchdog, continues its witch hunt against Ripple, Kraken, Binance, and Coinbase.

    A Recovery in Crypto Markets

    Meanwhile, the crypto market notes some major recovery today, a few days after taking a sharp nosedive following the troubling Binance news. Most cryptocurrencies, including Binance’s BNB Coin, show positive price momentum.

    Being the most prominent and largest digital asset, Bitcoin dipped to a low of $35.9K when the news about Binance’s $4 billion fine and guilty plea came to light. However, BTC is trading at a high value of $37.5K when writing this report. A similar pattern was noted in Ethereum and the crypto market in general.

    Reports indicate that most crypto assets are now hitting heights last seen in May 2022 despite the market suffering a major black swan event.

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  • SEC Records Second-Highest Financial Remedies of Nearly $5 Billion in FY 2023

    SEC Records Second-Highest Financial Remedies of Nearly $5 Billion in FY 2023

    The U.S. Securities and Exchange Commission (SEC) in its latest report revealed that the number of enforcement actions filed in the fiscal year 2023 (FY2023) increased by three percent from the previous record in the financial year of 2022.

    Some of the enforcement actions involved heavyweights in the crypto industry, with various accusations against cryptocurrency businesses and executives ranging from fraud to securities violations.

    Nearly $1 Billion Distributed to Harmed Investors

    The SEC’s enforcement actions in FY 2023 rose to 784 from 760 in the previous fiscal year, with the Commission obtaining $4,949 billion in financial remedies. A bulk of the amount – approximately $3.4 billion – comprised disgorgement and prejudgment interest, while civil penalties were worth $1,580 billion.

    According to the SEC, the financial remedies ordered in FY 2023 were the second highest in the agency’s history, after the regulator recorded its highest-ever financial remedies at over $6 billion in the previous fiscal year.

    Furthermore, the Commission distributed $930 million to affected investors, making it the second consecutive year that the agency has distributed over $900 million.

    Whistleblower awards also saw an uptick within the reporting period, with $600 million awarded in one year, with one receiving about $279 million, the largest reward awarded to a single individual in the history of the SEC’s program.

    SEC Went Hard on the Crypto Industry in FY 2023

    While the SEC announced charges against and settlement with top financial institutions such as Wells Fargo, Scotia Capital, Goldman Sachs, Citadel Securities, and HSBC, the American regulatory watchdog doubled down on its enforcement actions against the crypto industry.

    The SEC filed charges against top crypto entities and individuals, alleging fraud, securities violations, and unregistered operations. Some of the high-profile cases included FTX founder and former CEO Sam Bankman-Fried, along with other top executives of the collapsed cryptocurrency exchange, and Terraform Labs and its founder, Do Kwon.

    Also, the SEC accused Richard Heart and his three entities – Hex, PulseChain, PulseX – of fraud and unregistered securities sale. Other crypto businesses that were charged with unregistered securities offerings include Kraken, Celsius, and Nexo. While Kraken settled with the SEC to pay $30 million disgorgement, civil penalty, and prejudgment interest, Nexo paid a civil penalty worth $22.5 million.

    In June, the Commission slammed lawsuits against industry heavyweights Binance and its CEO Changpeng Zhao, along with Coinbase, with both entities denying the charges and seeking to dismiss the SEC’s lawsuit.

    The report further mentioned cases of alleged unlawful touting of cryptocurrency asset securities by celebrities who did not disclose that they were paid to make such promotions. Celebrities who settled with the regulator include Shaffer Smith, popularly known as Ne-Yo, Lindsay Lohan, Jake Paul, Akon, and Soulja Boy.

    However, notably absent from the SEC report is the regulator’s initial loss in its court case against Ripple, where the presiding judge ruled that secondary sales of XRP did not constitute an offer of investment contracts or securities.

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  • Crypto Taxation Misses the Mark: India Loses $420 Million in Potential Revenue Due to 1% TDS

    Crypto Taxation Misses the Mark: India Loses $420 Million in Potential Revenue Due to 1% TDS

    The Indian government has lost $420 million in what could have been a substantial revenue stream as a result of its taxation, forcing traders to move their transactions outside the country.

    Experts are now suggesting that the Indian government should take a more relaxed approach to its controversial stance on crypto taxation.

    According to a recent study by Delhi-based think tank Esya Centre, the highly debated crypto policy in India, involving a 1% transaction tax deducted at the source (TDS), should be reduced to 0.01%. This adjustment is recommended to align with the government’s objectives of increasing revenue and enhancing transparency.

    Taxing Times for Indian Crypto Traders

    The TDS – which is considered a form of income tax – has led to approximately five million crypto traders shifting their transactions offshore. The study estimates that since its introduction in July 2022, this tax has resulted in a potential revenue loss of $420 million for the government.

    Contrary to its intended purpose of taxing profitable transactions, the findings in the “Impact Assessment of Tax Deducted at Source on the Indian Virtual Digital Asset Market” indicate a significant shortfall in achieving this goal.

    This study builds on the Esya Centre’s previous report, revealing that Indians redirected over $3.8 billion in trading volume from local to international crypto exchanges following the announcement of the controversial rules.

    After the implementation of TDS, millions of Indian users transitioned to offshore platforms, and within a month, a single offshore platform noted over 450,000 new user registrations. Subsequently, the think tank observed a surge in web traffic, active users, and downloads from Indians on offshore platforms post-July 2022, accompanied by a decline in Indian VDA exchanges during the same period.

    An in-depth analysis of average weekly user figures, downloads, and web traffic further validated the thesis. Notably, the TDS provision, initiated on July 1, 2022, and the absence of any government relief from this tax framework as of February 1, 2023, had the most significant impact on investors, thereby highlighting users’ strong inclination for relief from the 1% TDS.

    “Based on INR P2P data collected from leading offshore exchanges, we estimate that over INR 3,50,000 crore was traded by Indians on offshore platforms since the 1% TDS was introduced in July 2023 – the figure amounts to over 90% of total VDAs traded by Indians.”

    This essentially means that only 0.2% of trading (by value) on offshore VDA exchanges, on which TDS should be deducted, is indeed TDS compliant. Esya, however, confirmed that its estimate does not include private transactions or larger over-the-counter (OTC) trades.

    In addition to lowering the TDS to 0.01%, the organization also recommended that India should provide clarity regarding the scope of TDS on offshore platforms. The act of registering with the Financial Intelligence Unit–India (FIU-IND) could serve as an ‘official’ makeshift license to distinguish between ‘Onshore’ and ‘Offshore’ platforms.

    Additionally, the recommendation includes empowering a government entity to blacklist and obstruct offshore Virtual Asset Service Providers (VASPs) and specific VDAs associated with non-compliant platforms.

    Calls Escalate to Ease Crypto Tax Rules

    It is important to note that the recommendation aligns with the increasing chorus from various players in the crypto space within the country, urging a reduction in the tax burden on crypto transactions.

    Amidst the crypto drawdown, Indian crypto exchanges resorted to trimming expenses, renegotiating partnerships, postponing employee salary increases, implementing layoffs, exploring alternative revenue streams, and undergoing rebranding initiatives. These measures aim to prolong their financial viability until they secure additional funding.

    While the current resurgence in the crypto market is increasing trading volumes in other regions, domestic trading platforms find themselves in a state of uncertainty. India has confirmed active discussions on a much-needed regulatory framework, and the taxation talk appears to be a deferred topic.

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  • US Senator Ted Budd Introduces Keep Your Coins Act

    US Senator Ted Budd Introduces Keep Your Coins Act

    In a move aimed at preserving the autonomy of cryptocurrency users and safeguarding their ability to self-custody digital assets, U.S. Senator Ted Budd (R-NC) has introduced the Keep Your Coins Act.

    This legislative proposal, which came after last year’s FTX exchange collapse, seeks to protect individuals’ rights to conduct cryptocurrency transactions without relying on third-party intermediaries.

    Senator Ted Budd’s Keep Your Coins Act

    U.S. Senator Ted Budd announced on November 7 the introduction of the Keep Your Coins Act. This legislation aims to protect individuals’ rights to self-custody Bitcoin and other cryptocurrencies, effectively allowing them to conduct transactions without needing third-party intermediaries. This development comes after last year’s FTX exchange collapse, which exposed vulnerabilities in centralized custody systems.

    If passed into law, the legislation would empower cryptocurrency users by allowing them to maintain custody of their digital assets in self-hosted wallets. It prohibits any federal agency from proposing rules that hinder an individual’s capacity to act as a self-custodian of digital assets.

    Senator Budd emphasized the importance of this legislation, stating, “As consumers face new challenges and risks associated with the use of digital currencies, we should be empowering individuals to maintain control over their own digital assets. This approach will foster financial freedom and a more decentralized cryptocurrency ecosystem.”

    Congressman Davidson’s Keep Your Coins Act

    Meanwhile, in July, Representative Warren Davidson (R-OH) saw the U.S. House Committee on Financial Services pass the Keep Your Coins Act of 2023 (H.R. 4841), a bill he sponsored. Davidson’s legislation primarily focuses on preventing government agencies from imposing regulations that would require the use of third-party custodians for digital wallets.

    Davidson has been vocal about his support for self-custody, stating on X: “Anyone attacking self-custody is telling you they oppose individual freedom. They don’t trust you, and they want someone who they can control to control your assets.”

    He added, “Self-custody is the antidote to FTX’s fraud, and my Keep Your Coins Act would protect self-custody from misguided attempts to restrict it.”

    While Senator Budd’s proposal gains momentum, it faces opposition. Senator Elizabeth Warren (D-MA) filed her bill last year, taking a different approach.

    Warren aimed to limit cryptocurrency self-custody, specifically non-hosted or self-custody wallets. She sought to require platforms and networks to identify and trace transactions involving such wallets. Notably, the Financial Crimes Enforcement Network (FinCEN) has previously recommended similar regulations, but they have yet to be enacted.

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  • CFPB proposal cracks down on payments providers | Bank Automation News

    CFPB proposal cracks down on payments providers | Bank Automation News

    The Consumer Financial Protection Bureau proposed a new rule today that would subject large nonbank companies, including digital wallet providers and payments apps, to undergo the same supervisory exam process as banks — leveling the payments playing field. Digital application usership has been on the rise in recent years as consumers looked to the apps […]

    Whitney McDonald

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  • DeFi Oversight: Consensys Advocates for Nuanced Approach Following IOSCO’s Report

    DeFi Oversight: Consensys Advocates for Nuanced Approach Following IOSCO’s Report

    As different jurisdictions gear up for regulations on the digital asset sector, DeFi remains a tricky subject.

    The International Organization of Securities Commissions (IOSCO) had recently weighed in on the matter and recommended that governments should identify the “Responsible Person” behind ostensibly decentralized finance applications and subject them to regulatory oversight similar to conventional financial market participants.

    Prominent blockchain software company – Consensys – has encouraged the global standard setter to clarify that some DeFi arrangements may have no “Responsible Person.”

    Consensys Weighs in on “Responsible Person”

    In a recent blog post, Consensys argued that IOSCO’s recommendation seems to presume that, in any given DeFi arrangement or activity, it is always possible to identify a Responsible Person who could be subject to regulatory obligations. It implies that decentralized systems either don’t exist or shouldn’t.

    This presumption, limiting online innovation to centralized models, is concerning, according to Consensys, which then asked IOSCO to acknowledge that certain DeFi setups lack a “Responsible Person,” as the EU does in exempting “fully decentralized” setups from MiCA regulation.

    Consensys admitted that the line between centralized and decentralized finance is more of a spectrum than a strict boundary but said that IOSCO’s recommendation oversimplifies this distinction.

    As such, taking a binary approach to identifying Responsible Persons “seems to encourage regulators to find such a party “at any cost.” Consensys advocated the need for a nuanced approach in determining Responsible Persons in DeFi. The firm added that regulatory obligations should align with the level of control, primarily targeting the centralized end of the spectrum.

    Various technical factors, such as governance, administrative control, oracle data, code availability, blockchain decentralization, and user interface diversity, must also be evaluated when assessing decentralization, according to Consensys, and regulators should refrain from imposing excessive obligations and, instead, consider a comprehensive range of decentralization factors to guide their decisions.

    Narrowing Down Definition of “Responsible Person”

    The definition of “Responsible Person” should be narrower, as applying traditional regulatory models doesn’t align with DeFi. The broad definition risks assigning responsibilities to individuals who cannot effect regulatory changes, creating legal uncertainty and discouraging innovation. Consensys advises against rigidly identifying Responsible Persons, as this could hinder the path towards decentralization.

    Instead, the company proposes exploring alternative methods, such as incentivizing voluntary compliance, which promotes decentralization and reduces intermediary risks while allowing DeFi participants to contribute globally.

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  • ZebPay CEO: International Statutory Bodies Can Join Forces in Framing ‘Cohesive’ DeFi Rules

    ZebPay CEO: International Statutory Bodies Can Join Forces in Framing ‘Cohesive’ DeFi Rules

    The proactive approach to framing crypto-specific guidelines comes as a respite after years of conversations about an outright ban on the sector that was initially mooted by the Reserve Bank of India.

    The Indian government may have shelved its plans to impose a blanket ban on crypto, but there’s still a long way to go, and the latest development depicts that the country’s approach has been a bit of a rollercoaster ride.

    A “Positive Precedent” for the World

    Indian financial regulators came to the realization that regulating this domain effectively necessitates collaboration beyond a single nation’s borders. The alternative would be an exhaustive attempt to oversee and control every device connected to the internet.

    As such, India has resorted to opening discussions with relevant stakeholders to chart a path forward. This year, India took on the role of presiding over the G20, offering a distinct chance to shape worldwide financial policies, especially cryptocurrencies.

    The G-20 leaders’ statement has officially supported the Financial Stability Board (FSB) recommendations for overseeing and regulating the activities related to crypto-assets. They have also embraced a synthesis paper presented by the International Monetary Fund (IMF) and the FSB.

    This report outlines a roadmap for a unified regulatory framework that takes into account various risks, including those unique to emerging markets, as well as risks associated with money laundering and terrorist financing.

    A proactive approach to framing crypto-specific guidelines is a welcome sign, according to Rahul Pagidipati, CEO of ZebPay. In a conversation with CryptoPotato, the exec said the coming few years will be pivotal for the industry.

    India’s presidency at G20 signifies an important stride towards establishing a cohesive global regulatory framework for the crypto industry, Pagidipati added. While the initiation of crypto-specific discussions is expected to set a “positive precedent,” there is still a significant journey ahead in terms of formulating regulations for the DeFi sector.

    Bone of Contention With DeFi Regulations

    Many countries around the world have taken proactive steps in establishing cryptocurrency regulations, even overcoming initial hesitancy. However, the same level of regulatory diligence does not extend to the decentralized finance (DeFi) sector. In the case of the United States, their strategy has been to take an aggressive stance by enforcing regulations first and then working out the specific rules.

    In an effort to regulate the decentralized finance (DeFi) sector, the International Organization of Securities Commissions (Iosco), a global authority on securities markets standards, recently released a consultation report with the goal of formalizing its policy recommendations by year-end to tackle concerns related to market integrity and investor protection within DeFi.

    The DeFi sector has disrupted numerous foundational principles of traditional financial regulation, which typically depend on identifying a central individual or entity tasked with ensuring market fairness and investor protection. Hence, it’s a tricky matter to determine who should be in charge of regulating the space.

    On that aspect, the CEO of the Indian crypto exchange urged,

    “International statutory bodies that have a global reach can collaborate with blockchain and crypto organizations in framing cohesive regulations without hampering innovations. This can ensure that common standards are achieved, clear and comprehensive guidelines are framed and applicable laws are enforced.”

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  • The Entrepreneur’s Comprehensive Guide to Navigating Legal Changes | Entrepreneur

    The Entrepreneur’s Comprehensive Guide to Navigating Legal Changes | Entrepreneur

    Opinions expressed by Entrepreneur contributors are their own.

    In an ever-changing landscape of regulations, staying ahead of legal and regulatory changes is critical to safeguarding your business’s success. It can be daunting to navigate the legal complexities, so read along for essential advice to help you stay on top of legal and regulatory changes, avoid potential pitfalls and ensure your business stays on the path to success.

    Why keep track of changing laws?

    Entrepreneurs benefit greatly from keeping track of changing laws as it is critical for the success and sustainability of their businesses. Regulations and laws affect every aspect of business operations, from hiring and firing employees to product development and marketing.

    Staying informed about these changes is vital for businesses to avoid potential legal pitfalls and penalties for non-compliance. Failure to comply with new regulations could result in costly fines, damage to reputation, legal disputes and even a loss of business. Being aware of new laws and regulations enables businesses to effectively adapt and adjust their operations accordingly, which can help them to gain a competitive advantage and grow their businesses.

    Here is how entrepreneurs can navigate legal and regulatory changes:

    1. Stay informed

    Keeping up to date with regulatory changes is crucial in ensuring that you are operating your business well within the guidelines. Regularly reviewing government websites, consulting with legal experts, subscribing to industry newsletters and attending conferences and seminars relevant to your industry are some of the tried-and-true ways to stay on top of changing regulations.

    You can also consider joining a professional association or networking group for your industry to stay informed on regulatory changes. Monitoring the websites and social media sites of government agencies is one of the best ways to stay informed about the most current changes that may occur. Going directly to the source of changing information is more reliable than solely relying on the media and news outlets.

    Related: What Business and Government Should Do When Innovation Outpaces Regulation

    2. Monitor your business practices

    Consistently monitor your business practices to ensure your business is compliant with regulatory changes. Regular internal audits can help businesses identify areas of non-compliance and take corrective actions. Entrepreneurs can develop an audit checklist to review their operations regularly and ensure that their business practices and processes are current with current regulations. Documenting compliance with the regulations can also help you avoid costly errors. Maintain accurate records to track compliance with regulatory requirements and ensure that all relevant employees understand and follow the new regulations.

    3. Embrace technology solutions

    Leveraging technology solutions can help streamline regulatory compliance. Software solutions can help automate and track compliance requirements by providing the necessary insight to manage your compliance obligations. Some technology solutions can automatically monitor legal and regulatory updates and even provide insights into changes that could potentially impact your business. Tools like Visualping.io, Social Mention, Evernote, RSS Feed Reader and Feedly are each excellent examples of technology solutions that can help entrepreneurs streamline the monitoring process.

    Related: Never Underestimate How Easy It Is to Screw Up When Deploying New Technology

    4. Seek professional advice

    In the case that you are uncertain about compliance updates and how they will impact your business, consult with legal and regulatory experts. They will provide insights into the implications of the changes for your business and advise you on how to comply with the new regulations. Seeking professional advice from lawyers, accountants and regulatory experts can provide peace of mind and reduce overhead costs. By partnering with an experienced legal team, businesses of any size can access the legal expertise they need to ensure they are in compliance with regulations.

    Related: Know When to Trust Your Gut and When to Seek Outside Advice

    5. Stay compliant!

    Navigating legal and regulatory changes can be challenging, but it’s fundamental for entrepreneurs to ensure that their businesses are compliant. Remember, compliance is not optional – it’s essential to the success of your business.

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  • Rein in the AI Revolution Through the Power of Legal Liability | Entrepreneur

    Rein in the AI Revolution Through the Power of Legal Liability | Entrepreneur

    Opinions expressed by Entrepreneur contributors are their own.

    In an era where technological advancements are accelerating at breakneck speed, it is crucial to ensure that artificial intelligence (AI) development remains in check. As AI-powered chatbots like ChatGPT become increasingly integrated into our daily lives, it is high time we address potential legal and ethical implications.

    And some have done so. A recent letter signed by Elon Musk, who co-founded OpenAI, Steve Wozniak, the co-founder of Apple, and over 1,000 other AI experts and funders calls for a six-month pause in training new models. In turn, Time published an article by Eliezer Yudkowsky, the founder of the field of AI alignment, calling for a much more hard-line solution of a permanent global ban and international sanctions on any country pursuing AI research.

    However, the problem with these proposals is that they require the coordination of numerous stakeholders from a wide variety of companies and government figures. Let me share a more modest proposal that’s much more in line with our existing methods of reining in potentially threatening developments: legal liability.

    By leveraging legal liability, we can effectively slow AI development and make certain that these innovations align with our values and ethics. We can ensure that AI companies themselves promote safety and innovate in ways that minimize the threat they pose to society. We can ensure that AI tools are developed and used ethically and effectively, as I discuss in depth in my new book, ChatGPT for Thought Leaders and Content Creators: Unlocking the Potential of Generative AI for Innovative and Effective Content Creation.

    Related: AI Could Replace Up to 300 Million Workers Around the World. But the Most At-Risk Professions Aren’t What You’d Expect.

    Legal liability: A vital tool for regulating AI development

    Section 230 of the Communications Decency Act has long shielded internet platforms from liability for content created by users. However, as AI technology becomes more sophisticated, the line between content creators and content hosts blurs, raising questions about whether AI-powered platforms like ChatGPT should be held liable for the content they produce.

    The introduction of legal liability for AI developers will compel companies to prioritize ethical considerations, ensuring that their AI products operate within the bounds of social norms and legal regulations. They will be forced to internalize what economists call negative externalities, meaning negative side effects of products or business activities that affect other parties. A negative externality might be loud music from a nightclub bothering neighbors. The threat of legal liability for negative externalities will effectively slow down AI development, providing ample time for reflection and the establishment of robust governance frameworks.

    To curb the rapid, unchecked development of AI, it is essential to hold developers and companies accountable for the consequences of their creations. Legal liability encourages transparency and responsibility, pushing developers to prioritize the refinement of AI algorithms, reducing the risks of harmful outputs, and ensuring compliance with regulatory standards.

    For example, an AI chatbot that perpetuates hate speech or misinformation could lead to significant social harm. A more advanced AI given the task of improving the stock of a company might – if not bound by ethical concerns – sabotage its competitors. By imposing legal liability on developers and companies, we create a potent incentive for them to invest in refining the technology to avoid such outcomes.

    Legal liability, moreover, is much more doable than a six-month pause, not to speak of a permanent pause. It’s aligned with how we do things in America: instead of having the government regular business, we instead permit innovation but punish the negative consequences of harmful business activity.

    The benefits of slowing down AI development

    Ensuring ethical AI: By slowing down AI development, we can take a deliberate approach to the integration of ethical principles in the design and deployment of AI systems. This will reduce the risk of bias, discrimination, and other ethical pitfalls that could have severe societal implications.

    Avoiding technological unemployment: The rapid development of AI has the potential to disrupt labor markets, leading to widespread unemployment. By slowing down the pace of AI advancement, we provide time for labor markets to adapt and mitigate the risk of technological unemployment.

    Strengthening regulations: Regulating AI is a complex task that requires a comprehensive understanding of the technology and its implications. Slowing down AI development allows for the establishment of robust regulatory frameworks that address the challenges posed by AI effectively.

    Fostering public trust: Introducing legal liability in AI development can help build public trust in these technologies. By demonstrating a commitment to transparency, accountability, and ethical considerations, companies can foster a positive relationship with the public, paving the way for a responsible and sustainable AI-driven future.

    Related: The Rise of AI: Why Legal Professionals Must Adapt or Risk Being Left Behind

    Concrete steps to implement legal liability in AI development

    Clarify Section 230: Section 230 does not appear to cover AI-generated content. The law outlines the term “information content provider” as referring to “any person or entity that is responsible, in whole or in part, for the creation or development of information provided through the internet or any other interactive computer service.” The definition of “development” of content “in part” remains somewhat ambiguous, but judicial rulings have determined that a platform cannot rely on Section 230 for protection if it supplies “pre-populated answers” so that it is “much more than a passive transmitter of information provided by others.” Thus, it’s highly likely that legal cases would find that AI-generated content would not be covered by Section 230: it would be helpful for those who want a slowdown of AI development to launch legal cases that would enable courts to clarify this matter. By clarifying that AI-generated content is not exempt from liability, we create a strong incentive for developers to exercise caution and ensure their creations meet ethical and legal standards.

    Establish AI governance bodies: In the meantime, governments and private entities should collaborate to establish AI governance bodies that develop guidelines, regulations and best practices for AI developers. These bodies can help monitor AI development and ensure compliance with established standards. Doing so would help manage legal liability and facilitate innovation within ethical bounds.

    Encourage collaboration: Fostering collaboration between AI developers, regulators and ethicists is vital for the creation of comprehensive regulatory frameworks. By working together, stakeholders can develop guidelines that strike a balance between innovation and responsible AI development.

    Educate the public: Public awareness and understanding of AI technology are essential for effective regulation. By educating the public on the benefits and risks of AI, we can foster informed debates and discussions that drive the development of balanced and effective regulatory frameworks.

    Develop liability insurance for AI developers: Insurance companies should offer liability insurance for AI developers, incentivizing them to adopt best practices and adhere to established guidelines. This approach will help reduce the financial risks associated with potential legal liabilities and promote responsible AI development.

    Related: Elon Musk Questions Microsoft’s Decision to Layoff AI Ethics Team

    Conclusion

    The increasing prominence of AI technologies like ChatGPT highlights the urgent need to address the ethical and legal implications of AI development. By harnessing legal liability as a tool to slow down AI development, we can create an environment that fosters responsible innovation, prioritizes ethical considerations and minimizes the risks associated with these emerging technologies. It is essential that developers, companies, regulators and the public come together to chart a responsible course for AI development that safeguards humanity’s best interests and promotes a sustainable, equitable future.

    Gleb Tsipursky

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  • Mastercard ordered by FTC to help rivals route transactions | Bank Automation News

    Mastercard ordered by FTC to help rivals route transactions | Bank Automation News

    The Federal Trade Commission ordered Mastercard Inc. to start providing its competitors with customer account information they need to process debit payments, a move that could cut costs for merchants. The enforcement action, approved in a 4-0 vote, is the culmination of a years-long investigation focused on Mastercard and Visa Inc.’s policies prohibiting merchants from […]

    Bloomberg News

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