Digital Transformation Notes | June 2024

G7 Leaders' Communiqué on Digital Transformation

On June 14th, G7 leaders convened at Italy’s Apulia coast to reaffirm their commitment to tackling a number of global challenges, including those inherent to some deep digital technologies, such as AI. In continuation of their Hiroshima project (on the safe and responsible development and use of AI) and following up on the wider Seoul AI Safety Summit earlier this year, government leaders from the U.S., Germany, Japan, France, Italy, Canada, and the UK doubled down on the need for an inclusive and human-centered approach to AI development. They agreed on several specific measures, mainly focusing on international alignment on AI governance and some related issues, including:

• developing inclusive AI governance frameworks that promote innovation while mitigating risks and preventing fragmentation;

• building on the outcomes of the AI Seoul Summit and preparing for future milestones such as the UN Summit of the Future and the AI Action Summit in 2025;

• coordinating efforts to evolve governance and regulatory frameworks with a risk-based approach, aiming for a shared understanding of risk management and international standards for AI development and deployment;

• launching an action plan to harness AI in the world of work, ensuring decent work conditions, workers' rights, and access to reskilling and upskilling opportunities while addressing labor market challenges; and

• establishing a Data Free Flow with Trust (DFFT) initiative to enable trustworthy cross-border data flows and to bolster the digital economy.

The G7 Apulia summit document highlights a human-centric and risk-based approach to AI, endorsing the Political Declaration on Responsible Military Use of AI and Autonomy (REAIM) and stressing the importance of maintaining judicial independence in the face of AI deployment within the justice sector.

The OECD's Insights on AI in Government

Earlier this month, the OECD released a pivotal paper on the use of generative AI in the public sector, highlighting the transformative potential of AI technology within government operations. While much of the global debate has focused on AI regulation, this paper shifts attention to the benefits of AI in enhancing government functionality, policy design, and service delivery. The OECD's guidance aims to:

• promote inclusivity and responsiveness in public policy design and delivery through generative AI;

• enhance government accountability by improving oversight capabilities;

• foster a common understanding of challenges like bias, transparency, data privacy, and security, aiding governments in establishing appropriate guardrails for AI use.

Regulation of Stablecoins in Europe

Effective June 30th, titles III & IV of the Markets in Crypto-Assets Regulation (MiCA) will start to apply with mandatory effect, impacting stablecoins, referred to here as either 'asset-referenced tokens' or 'e-money tokens'. This regulation will apply in addition to already existing EU rules for e-money. It marks the next phase of digital asset regulation in Europe as it provides for the first time a set of rules that deal very specifically with the tokenized, decentralized nature of these digital assets. Given the crash of some stablecoins in 2022, a particular focus rests on keeping these tokenized/decentralized stablecoins actually stable. To that end, some of the most relevant requirements for those assets now include that:

• issuers must obtain a specific authorization to offer stablecoins to the public and secure proper trading admission within the EU;

• a 'crypto-asset white paper' must be prepared with mandatory disclosures, including information on the offer, rights and obligations, underlying technology, and related risks;

• issuers failing to provide complete, fair, and clear information will be liable for any resulting losses;

• stablecoins with an issue value exceeding €100,000,000 are subject to specific quarterly reporting obligations to the competent authority.

EU Council's New Regulation on AI Supercomputing

On June 17th, the EU Council adopted an amendment to the European High-Performance Computing (EuroHPC) joint undertaking, introducing 'AI factories' as a new objective. AI factories, which provide supercomputing infrastructure and services, will benefit from EU funding covering up to 50% of acquisition and operational costs. This initiative aims to position Europe at the forefront of the AI sector by equipping researchers and start-ups with advanced tools for AI model development and testing.

Stay tuned for more updates as we continue to monitor and analyze these critical developments in the digital transformation landscape.

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Monthly notes on digital transformation and law - 28 June 2024

Authored by Leo von Gerlach and Julio Carvalho.