10.21 AI Daily The rapid development of artificial intelligence has sparked global follow and regulatory considerations.

1. Headline

1. The European Union has released its first draft of artificial intelligence regulations, which will impose strict oversight on high-risk AI systems.

The European Commission announced a landmark artificial intelligence (AI) regulatory draft on Thursday, aimed at protecting citizens from the risks posed by AI systems while supporting Europe's development in this emerging technology field. The draft will impose strict new rules and requirements on AI systems deemed “high-risk,” including biometric identification and other systems that may endanger personal safety or fundamental rights.

According to the draft, developers of high-risk AI systems will need to manage risks and allow for human oversight to ensure that the systems are safe throughout their lifecycle. Violators will face fines of up to 6% of their global annual revenue. In addition, the draft also specifies requirements for the transparency and explainability of AI systems, as well as new rules for the regulation of artificial intelligence.

The draft regulation marks the EU's leadership position in global artificial intelligence governance and is expected to serve as a benchmark for other regions to develop similar regulations. However, some tech companies and countries are concerned that excessive regulation may hinder innovation. Overall, the draft aims to seek a balance between promoting innovation and protecting citizens' rights.

2. OpenAI has launched the latest language model GPT-4, which has significantly improved performance and sparked heated discussions.

OpenAI launched its latest large language model GPT-4 this week, showing impressive performance improvements in multiple benchmark tests, which has sparked widespread attention and discussion in the tech community. It is reported that GPT-4 not only has made leaps in natural language understanding and generation but also for the first time possesses the ability to understand and generate images.

In a series of public tests, GPT-4 outperformed human levels in multiple areas such as reading comprehension, mathematical reasoning, programming, and creative writing. It also demonstrated excellent multimodal capabilities, able to generate new content based on images and text. Some experts believe that GPT-4 represents a significant advancement in general artificial intelligence.

However, some researchers have raised alarms about the potential risks associated with GPT-4. Due to its powerful language generation capabilities, GPT-4 could be misused to generate false information and harmful content. In addition, some people have expressed concerns about its lack of transparency and interpretability in decision-making processes.

OpenAI stated that GPT-4 underwent multiple rounds of safety reviews before its release and took various measures to mitigate potential risks. However, the company also acknowledges that GPT-4 may still have biases and other flaws. In the future, OpenAI will continue to work on improving the safety and reliability of large language models.

3. DeepMind breakthrough! AlphaFold is expected to solve the protein folding problem, bringing revolutionary progress to drug discovery.

Artificial intelligence company DeepMind announced that its AlphaFold system has made breakthrough progress in predicting the three-dimensional structure of proteins, which is expected to ultimately solve a fundamental problem that has troubled scientists for decades. This breakthrough is seen as a milestone in the fields of biology and drug discovery, potentially opening up new avenues for disease treatment.

Proteins are the basic building blocks of life, and their three-dimensional structure determines their function. For years, scientists have been working to unravel the mysteries of protein folding, but progress has been very slow due to its high complexity. DeepMind's AlphaFold system uses artificial intelligence algorithms and a vast amount of training data, and now it can predict the three-dimensional structure of proteins more accurately than any previous methods.

This breakthrough will greatly accelerate the research process of protein functions and provide key clues for designing new drugs and treatment plans. Researchers indicate that in the future, it may be possible to design small molecule drugs that can effectively intervene based on the structure of disease-related proteins. In addition, AlphaFold also has great potential in areas such as fundamental biology, enzyme engineering, and new materials design.

DeepMind has decided to make the AlphaFold database and tools freely available to scientists worldwide in order to maximize the impact of this breakthrough. Some experts believe this could serve as a model for how artificial intelligence can promote scientific advancement.

4. Tech giants in Silicon Valley join the “arms race” in artificial intelligence, with Amazon, Meta, and others investing billions of dollars.

The competition in the field of artificial intelligence is becoming increasingly intense, with Silicon Valley tech giants making significant investments in an “arms race” in AI, likened to a “new space race.” Companies like Amazon, Meta, Google, Apple, and Microsoft are investing billions of dollars in AI research and development, trying to create the next generation of revolutionary AI systems.

Amazon has invested billions of dollars in artificial intelligence and machine learning and plans to invest billions more in the coming years. The company believes that artificial intelligence will become the core driving force of its business. Meanwhile, Meta is pouring billions into AI research, hoping to develop a new generation of AI systems that can drive its products and services.

Companies such as Google, Apple, and Microsoft are also increasing their investments in the field of artificial intelligence. Apple is actively hiring talent in artificial intelligence to support the development of its future products and services. Microsoft sees artificial intelligence as a key growth point for its cloud computing business.

The winner of this artificial intelligence “arms race” may dominate the direction of technological development for the next decade and even several decades. Analysts point out that breakthroughs in artificial intelligence will bring tremendous commercial value to these companies, but may also pose some potential social and ethical risks that require extra vigilance.

5. The frenzy over artificial intelligence raises regulatory concerns, and the United States plans to strengthen regulation of AI systems.

The rapid development of artificial intelligence technology has raised increasing regulatory concerns, and the U.S. government intends to strengthen regulation of artificial intelligence systems. The Chair of the Federal Trade Commission, Lina Khan, stated that the FTC is studying how to better regulate artificial intelligence systems to protect consumer privacy and ensure fair competition.

Hahn pointed out that artificial intelligence systems have potential discrimination and unfairness risks, which may harm consumer rights. She called for new rules requiring AI companies to ensure the fairness, transparency, and accountability of their systems. Additionally, the FTC will review the data collection and usage practices of AI companies to prevent the misuse of consumer data.

At the same time, the U.S. Congress is also considering legislation to strengthen the regulation of artificial intelligence. Some lawmakers are calling for the establishment of a comprehensive regulatory framework for artificial intelligence to standardize the development and use of AI systems. However, industry insiders warn that excessive regulation could hinder innovation and affect the U.S.'s competitiveness in the field of artificial intelligence.

Overall, the rapid development of artificial intelligence technology has put tremendous pressure on regulatory agencies. In the future, the U.S. government needs to seek a balance between promoting innovation and protecting public interests, and formulate reasonable and effective AI regulatory policies.

2. Industry News

( 1. Bitcoin will continue to fluctuate in the short term.

Bitcoin has seen a slight increase of 0.8% in price over the past 24 hours, currently reported at $109,000. Analysts believe that Bitcoin will continue to maintain a volatile pattern in the short term, mainly due to cautious investor sentiment and a decline in trading volume. Nevertheless, the long-term outlook for Bitcoin remains positive, as institutional investors continue to pour in, and cryptocurrency regulation is becoming clearer, which is conducive to the widespread adoption of Bitcoin.

However, the price volatility of Bitcoin also poses certain risks for investors. According to data, in the past week, the price of Bitcoin reached a high of $112,000 and a low of $105,000, with a fluctuation range exceeding 6%. Therefore, investors need to closely monitor market dynamics and manage their risk exposure appropriately.

Industry insiders say that the short-term trend of Bitcoin will depend on changes in the macroeconomic situation and regulatory policies. If the global economy continues to recover and cryptocurrency regulatory policies are further relaxed, Bitcoin is expected to usher in a new round of price increases. Conversely, if economic growth slows down and regulatory policies tighten, the price of Bitcoin may face downward pressure.

) 2. Ethereum is facing selling pressure, and the price may fluctuate downward in the short term.

Ethereum's price has dropped by 2.1% in the past 24 hours, now reported at $3850. Analysts believe that Ethereum is facing selling pressure, and the price may fluctuate downward in the short term. The main reason is the congestion in the Ethereum network leading to high transaction fees, coupled with concerns from regulatory bodies regarding cryptocurrency regulation, which has affected investor sentiment.

Data shows that the average transaction fee on the Ethereum network has exceeded $50, far higher than other public chains. This not only increases the cost for users but also affects the application scenarios of Ethereum. In addition, Gary Gensler, the chairman of the U.S. Securities and Exchange Commission, recently stated that cryptocurrency regulation will be a priority, which has also intensified investor concerns.

However, the long-term outlook for Ethereum remains positive. As the largest smart contract platform, Ethereum has a wide range of application scenarios in decentralized finance ( DeFi ) and non-fungible tokens ### NFT ###. With the advancement of Ethereum 2.0, issues of network congestion and high transaction fees are expected to be alleviated.

Analysts expect that if Ethereum can successfully complete the 2.0 upgrade and gain approval from regulatory authorities, its price is likely to strengthen again. However, in the short term, Ethereum's price may be subject to selling pressure and experience fluctuations downward.

( 3. The Solana ecosystem continues to heat up, and the price of SOL is expected to break the $100 mark.

The Solana ecosystem continues to heat up, with the price of SOL rising by 3.2% in the past 24 hours, currently reported at $96. Analysts believe that with the continuous emergence of Solana ecosystem projects, the price of SOL is expected to break through the $100 mark.

Data shows that there are currently over 400 projects deployed on the Solana network, covering multiple fields such as DeFi, NFT, and gaming. Among them, projects like Serum and Solana Pay have seen continuous growth in user numbers and transaction volumes, driving the prosperous development of the Solana ecosystem.

At the same time, the Solana Foundation is also continuously increasing its investment efforts to provide financial support for ecological projects. It is reported that the Solana Foundation has invested over $500 million to support ecological construction and technological research and development.

However, the Solana network also faces some challenges, such as insufficient decentralization, network congestion, and other issues. But overall, Solana stands out in the competition among public chains due to its high performance and low transaction fees, attracting a large influx of developers and funds.

Analysts expect that if Solana can maintain a good development momentum, the price of SOL is likely to break the $100 mark in the coming months. However, investors also need to pay attention to potential risks, such as intensified competition and changes in regulatory policies, to avoid unnecessary losses.

3. Economic Dynamics

) 1. The Federal Reserve raised interest rates by 75 basis points, and inflationary pressures persist.

The inflation rate in the United States remains high, with the core inflation rate rising 6.6% year-on-year in September, far exceeding the Federal Reserve's target of 2%. To curb inflation, the Federal Reserve announced another 75 basis point interest rate hike at its monetary policy meeting on November 2, raising the target range for the federal funds rate to 3.75%-4%. This is the most aggressive rate hike by the Federal Reserve since the 1980s.

The U.S. economy has entered a technical recession in the first half of this year, but the job market remains relatively robust. The annualized GDP growth rate for the third quarter is 2.6%, slightly above expectations. Federal Reserve Chairman Powell stated that despite the increasingly apparent signs of economic slowdown, inflationary pressures remain severe, necessitating further tightening of monetary policy.

Investors reacted mildly to the Federal Reserve's decision to raise interest rates by 75 basis points, as the market had already fully priced in this expectation. However, Powell's hawkish comments at the press conference raised concerns in the market. He hinted that to control inflation, the Federal Reserve might raise rates to a level higher than the market expects. This statement caused the stock market to drop and the dollar index to rise.

Goldman Sachs chief economist Jan Hatzius believes that the Federal Reserve still needs to raise interest rates further, forecasting that the federal funds rate will rise to around 5% by early 2023. He warned that to achieve the 2% inflation target, the U.S. economy may need to go through a period of recession. Citigroup, on the other hand, expects that the Federal Reserve will end the rate hike cycle by the middle of next year.

( 2. The new government in the UK has launched a tax reduction plan, causing the pound to plummet.

The newly appointed British government announced a massive tax cut plan on September 23, aimed at stimulating economic growth. The plan includes the cancellation of the previously announced corporate tax rate increase, a freeze on energy price caps, reductions in personal income tax, and several other measures. These tax cut policies are expected to reduce the British government's tax revenue by approximately £160 billion over the next five years.

The new government's tax reduction plan in the UK immediately triggered turmoil in the financial markets. The exchange rate of the pound against the dollar plummeted nearly 4% on the day of the announcement, hitting a new low since 1985. Bond yields soared, with the 10-year government bond yield briefly breaking 4.5%. The Bank of England had to step in to purchase long-term government bonds to stabilize the market.

The International Monetary Fund ) IMF ### expressed concerns about the new UK government's tax cut plans, stating that it would exacerbate inflationary pressures and the fiscal deficit. The UK's inflation rate has reached 9.9%, far exceeding the Bank of England's target of 2%. The IMF warned that implementing large-scale tax cuts carries risks in the context of high inflation and high debt levels.

Citigroup economist Benjamin Habib stated that the new UK government's tax cut plan is disappointing and lacks a credible medium-term fiscal plan. He expects the pound to further depreciate and the Bank of England will have to significantly raise interest rates to defend the credibility of its monetary policy.

3. The EU has passed a new round of sanctions against Russia, exacerbating the energy crisis.

On October 6, the European Union officially adopted the eighth round of sanctions against Russia, which includes imposing a price cap on Russian oil exports. This is the toughest round of sanctions the EU has implemented against Russia due to the Russia-Ukraine conflict.

Russian President Putin subsequently announced that Russia would not export oil to countries that implement price caps. Putin's statement has heightened the risk to European energy supplies. The EU's dependence on Russian energy remains high, with Russian natural gas and oil accounting for about one-third of the EU's total imports.

The energy crisis in Europe has been ongoing for nearly a year. Since the beginning of this year, natural gas prices have surged nearly tenfold at one point. Although there has been a recent decline, prices remain at historically high levels. The soaring energy prices are eroding the European economy, causing significant increases in costs for manufacturing and household living. Governments in multiple EU countries have been forced to implement energy subsidy policies to alleviate the urgent needs of the public.

Deutsche Bank released a report predicting that if Russia completely halts natural gas supplies this winter, the Eurozone economy will fall into a recession lasting up to 8 quarters in 2023. Goldman Sachs predicts that the Eurozone economy will shrink by 0.6% in 2023.

European Central Bank President Christine Lagarde stated that the ECB will continue to raise interest rates to combat inflation. She warned that if the Russia-Ukraine conflict escalates further, the European economy will face greater downward risks.

4. China adheres to the dynamic zero-COVID policy, putting pressure on the economy.

As major economies around the world generally relax their epidemic prevention policies, China continues to adhere to the dynamic zero-COVID strategy. Since the beginning of this year, several major cities in China have implemented strict lockdown measures, placing heavy pressure on economic development.

According to data from the National Bureau of Statistics of China, GDP grew by 3% year-on-year in the first three quarters, far below the target of 5.5% set at the beginning of the year. GDP grew by 3.9% year-on-year in the third quarter, showing a recovery compared to the first half of the year, but still at a low level. In September, industrial production and consumption data also declined simultaneously.

The main factors dragging down the Chinese economy include: ongoing pandemic control measures that have restricted production and consumption activities, sluggish investment in the real estate sector, and a slowdown in export growth. The Chinese government has introduced a series of supportive policies, including infrastructure investment and tax cuts, but the effects have been limited.

Yi Gang, the governor of the People's Bank of China, stated that the Chinese economy is facing threefold pressures of demand contraction, supply shocks, and weakened expectations. He emphasized that macro policies will continue to strengthen efforts to boost market confidence and inject momentum for stable economic operation.

Citigroup's report predicts that if China maintains its current epidemic prevention policies, the economic growth rate will be only 4.7% next year. Goldman Sachs believes that if the epidemic prevention measures are relaxed, China's economic growth rate will rebound to 5.7%.

( 5. The Bank of Japan maintains its ultra-loose monetary policy, leading to the depreciation of the yen.

In the context of widespread interest rate hikes and tightening among major global economies, the Bank of Japan has maintained its ultra-loose monetary policy. Bank of Japan Governor Haruhiko Kuroda reiterated that it will continue to implement a large-scale bond purchasing program to keep long-term interest rates at around 0%.

The Bank of Japan's ultra-loose monetary policy stands in stark contrast to other major economies, leading to a significant depreciation of the yen against the dollar. Since the beginning of this year, the yen has fallen more than 20% against the dollar, briefly dropping below the 140 yen per dollar mark. The depreciation of the yen has exacerbated inflationary pressures in Japan, with the core inflation rate rising 3.6% year-on-year in October, marking the highest level since 1982.

The Japanese government is cautious about the depreciation of the yen. The Japanese finance minister welcomes the depreciation of the yen, believing it will benefit Japanese exports. However, the Bank of Japan warns that if the yen depreciates too quickly, it will exacerbate inflationary pressures.

Citigroup's report predicts that the Bank of Japan will gradually start raising interest rates in the first half of 2023 to ease the pressure of yen depreciation. Goldman Sachs, on the other hand, believes that the Bank of Japan may start raising rates in the second half of next year.

Former Bank of Japan board member Takahiro Ito stated that the Bank of Japan should end its ultra-loose monetary policy in the first half of next year to prevent further deterioration of inflation. He warned that if the Bank of Japan continues to maintain its ultra-loose policy, the depreciation of the yen will further intensify inflationary pressures.

4. Regulation & Policy

) 1. The Chairman of the U.S. Securities and Exchange Commission calls for cryptocurrency regulatory reform

Gary Gensler, the chairman of the U.S. Securities and Exchange Commission (SEC), called for reforms in cryptocurrency regulation during a speech. Gensler stated that the existing regulatory framework can no longer meet the demands of the evolving cryptocurrency market and new rules need to be established to protect investors' rights.

Gensler pointed out that the cryptocurrency market has many risks and vulnerabilities, including a lack of transparency, manipulation, and money laundering activities. He believes that the SEC needs to gain broader regulatory powers to ensure fairness and efficiency in the cryptocurrency market.

Gensler proposed several reform suggestions, including implementing stricter disclosure requirements for cryptocurrency exchanges and issuers, strengthening anti-money laundering measures, and establishing investor protection mechanisms. He also urged Congress to legislate to grant the SEC more regulatory power.

This appeal has sparked widespread attention and discussion in the cryptocurrency industry. Some businesses and investors believe that appropriate regulation is beneficial for the long-term healthy development of the industry. However, others are concerned that excessive regulation could stifle innovation. Coinbase CEO Brian Armstrong stated that the SEC should take a “pragmatic and inclusive” approach, rather than simply incorporating cryptocurrencies into the existing securities law framework.

2. The UK Financial Conduct Authority has released a consultation paper on the regulatory framework for crypto assets.

The Financial Conduct Authority (FCA) in the UK has released a consultation paper on a regulatory framework for crypto assets, aiming to establish comprehensive regulatory rules for crypto assets. This framework covers various aspects of crypto assets including issuance, trading, and custody.

According to the draft consultation, the FCA will implement an approval system for cryptocurrency issuers, requiring them to disclose relevant information and meet certain standards. At the same time, cryptocurrency exchanges and custodial service providers will also need to obtain permission from the FCA.

The FCA has also proposed a series of anti-money laundering and counter-terrorism financing measures, including customer due diligence, transaction monitoring, and more. In addition, the consultation paper also covers topics such as investor protection and prevention of market manipulation.

This regulatory framework aims to create an orderly and transparent environment for the UK crypto asset market, protecting investors' rights. However, some industry insiders are concerned that excessive regulation may stifle innovation.

The UK Crypto Industry Association has stated that they welcome reasonable regulation, but hope that the FCA can adopt a flexible and pragmatic approach to avoid placing unnecessary burdens on the industry. The association will make specific suggestions regarding the consultation draft.

3. The Monetary Authority of Singapore has issued new regulations for digital token payment service providers.

The Monetary Authority of Singapore (MAS) has issued new regulations for digital token payment service providers. This rule will take effect from January 1, 2024, and aims to strengthen regulation in this area.

According to the new regulations, digital token payment service providers need to obtain a license from MAS and comply with a series of requirements, including implementing anti-money laundering and anti-terrorism financing measures, protecting customer funds, disclosing relevant information, etc.

MAS stated that this new regulation aims to maintain the reputation and integrity of Singapore's financial center, while also creating a favorable regulatory environment for digital token payment service providers.

The new regulations have received broad support within the industry. The Singapore FinTech Association believes that a clear regulatory framework is conducive to the long-term development of the industry. However, some companies are concerned about the increase in compliance costs.

Chris Maszczyk, the CEO of a digital token payment service provider, stated that they welcome reasonable regulations and will fully comply with the new rules. He believes this will help enhance the transparency and trust of the industry.

4. The European Commission has proposed comprehensive regulation of the crypto asset market.

The European Commission has proposed a new regulation on the supervision of the cryptocurrency market, aiming to establish a unified regulatory framework at the EU level. This proposal covers multiple aspects of cryptocurrency assets, including issuance, trading, and custody.

According to the proposal, the EU will implement an approval system for cryptocurrency asset issuers, requiring them to disclose relevant information and meet certain standards. Cryptocurrency exchanges and custodial service providers will also need to obtain permission from regulatory authorities.

In addition, the proposal includes specific provisions on anti-money laundering, counter-terrorism financing, and investor protection. The European Commission stated that this regulatory framework will create a safe and transparent environment for the cryptocurrency market.

The proposal has attracted widespread attention from EU member states and the industry. Some countries believe that a unified regulatory framework is beneficial for the development of the crypto asset market. However, there are also countries that worry that excessive regulation could hinder innovation.

The cryptocurrency industry association welcomed the proposal but also raised some concerns and suggestions. They hope that the EU can adopt a pragmatic and inclusive approach to avoid imposing unnecessary burdens on the industry.

Overall, this proposal from the European Commission reflects the growing attention of regulators to crypto assets. The future legislative process and specific implementation details will determine its impact on the industry.

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