Listen to the Article: Year Two of AI Era, What's Next in 2024?

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The first month of 2024 is coming to an end, and as the fireworks that celebrated the new year around the world fade away, the heat of the financial market will pick up again. For the global fintech industry, this year's regulatory landscape will become more complex and diverse, and the reasons behind it are not only from aspects we've known for so long, such as payments, cryptocurrencies, digital bonds, etc., but from novel technologies too, and I mean artificial intelligence (AI) and distributed ledger technology (DLT), that are likely to bring opportunities as well as challenges.

Shoe Is About to Drop: How AI Will be Regulated in US, EU and UK

In October 2023, US President Biden issued an Executive Order on the Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence, which was a meaningful milestone for the US government on how they will rein in the technology. Although the EO focused on how the government officials should use AI properly, it is expected that as the regulators implement it this year, its impact on the fintech industry will gradually emerge.

In September 2023, the European Parliament announced a provisional agreement has been reached on the "Artificial Intelligence Act". The Act aims to ensure that high-risk AI technologies do not impose threats against civil rights, democracy, the rule of law, environmental sustainability, and stipulates the obligations that must be complied with when using AI according to the potential risks and impact of the technology. This provision will establish legally binding rules for the development of AI systems this year and beyond, and will, too, affect all stakeholders in the global AI industry chain. It is expected that other jurisdictions will follow suit too.

UK has not introduced an AI regulatory framework in spite of being a global fintech hub. Still, the five cross-cutting principles have been issued by the British lawmakers as regulatory guidance last year. It is anticipated that in 2024, the kingdom's regulators are going to elaborate on how to apply the principles within their scope of authority.

International Partnership Will Continue to Enhance

In 2024, in addition to the key jurisidictions laid out above, the global requirements and reviews for internal risk assessment and legal compliance of AI are likely to be strengthened as well. For the financial sector, the emphasis is placed on the transparency, intellectual property and privacy protection of financial institutions.

Despite the fact that traders have been increasingly fraud-vigilant over the years, it seems to be more difficult to distinguish between what is real and what is not as technologies such as GenAI and Deepfake see exponential development. Apparently, we are now living in a time in which videos, portraits or even the biometrics such as a person's voice can be AI-simulated, making it terribly hard to tell the difference.

Therefore, global regulators will tighten the compliance process this year, examine the existing and expected uses of AI, including any relevant third-party relationships, define, implement or improve their AI strategy and risk management framework, and create or strengthen effective oversight systems.

For Financial Institutions, Delivering Responsible AI Outcomes Is the Key

We will witness more and clarified standards on AI, cyber, data in 2024, so that harms potentially caused by AI and alike can be further curbed to protect users and society. Hence, whether it is a fintech or any other financial institution, optimizing their risk management models and regulatory frameworks is essential to ensure that they can deliver responsible AI outcomes.

Although AI is able to help us with many tasks at present, the word "intelligence" in this technology as we speak has not yet reached the level of being able to operate independently of human operation, and in many ways it heavily relies more on the self-discipline of users.

We hope that more fintech companies will actively participate in this AI reform in a more reasonable regulatory framework, promote the continuous improvement of smart trading, and bring more imagination to the financial sector.