In 2023, at least 25 of the Several States of the Union, plus Puerto Rico and the District of Columbia, have introduced legislation to regulate artificial intelligence. At least 18 States plus Puerto Rico actually adopted legislation or at least resolutions on AI. As usual, the States wasted little time coordinating their work or even just taking account of what other States are doing or have already done.
AI as a technology, and the regulatory challenges it presents, is a global phenomenon. If anything, it affects us in more ways than blockchain and digital currency technology. The best way to harness AI would be via international conventions, negotiated, signed, and ratified by as many countries as possible. The worst way of regulating AI is via parochial instruments that are poorly coordinated and mainly create additional hurdles and compliance headaches for the developers and their use cases without adding benefits.
Unfortunately, we have been there before. Given the failure of the United States Congress to adopt nationwide laws for safe and productive use of blockchain technology, federal agencies like the SEC, CFTC, FinCEN, OFAC, OCC, FDIC, FTC, IRS, CFPB, DoJ, and EPA all have adopted their own rules and regulations about blockchain technology, often incompatible and sometimes directly contradictory. In addition, the Several States have been going at it with gusto. To give but one example, anyone wishing to enter into cryptocurrency transactions with any resident(s) of the State of New York has to obtain a New York BitLicense, which is about as easy to get as a license to trade stocks on Wall Street. Needless to say, the BitLicense is not recognized anywhere else in the U.S. and a majority of the other States already have their own licensing requirements. As a result it is now estimated that a startup in the blockchain space will need to spend between US$3 and 5 million just to get the permissions required to work in the U.S., if it is even possible to get all of them. Yet, as FTX demonstrated just last year, even those companies that are widely licensed and compliant are anything but safe from fraud and collapse. In other words, we are making innovation extremely difficult without actually achieving the levels of safety and protection we are aiming for.
The big question is whether we are able to learn from the regulatory debacle in the blockchain space and do a better job for artificial intelligence. After all, we want to be a leading force in these future-oriented technologies, instead of driving our brightest minds and most creative entrepreneurs offshore and into foreign jurisdictions that are more welcoming. Unfortunately, given that Congress is nowadays not only permanently in fundraising and election mode but also more deeply divided than ever, I am not holding my breath. FE