7 ASIAN LEGAL BUSINESS – NOVEMBER 2023 WWW.LEGALBUSINESSONLINE.COM BRI EFS Eddie Yue, chief executive of Hong Kong’s de-facto central bank, has laid out several priorities in the SAR’s regulatory approach moving forward, considering previous “high-profile failures.” At the Bloomberg forum, Yue spoke in favour of the continued strengthening of the credibility and status of licensed virtual asset exchanges. But Low thinks it will be difficult to convince retail investors to dip their toes back into trading cryptocurrencies following the JPEX episode in the short term. “I expect Hong Kong regulators to plug the various gaps in their regulation of virtual assets, particularly in advertising and the OTC space. This was not the first scandal in the industry, and it will not be the last. So long as they are regulated differently from traditional securities, there will be space for regulatory arbitrage, and bad actors will leverage that to target unsuspecting investors,” says Low. WHAT IS THE WAY FORWARD FOR HK’S CRYPTO DREAMS? From a broader perspective, although cryptocurrencies came to life with hopes of circumventing government regulations, Low is less convinced that the asset class would prove a substantive disrupting force to traditional finance. “Despite recriminations, there is insufficient reflection on the utter ineffectiveness of so-called virtual assets as a revolutionary ‘innovation,’” says Low. As regional jurisdictions, including Singapore and Dubai, have tightened their virtual assets regimes, Low suggests that the SAR should tread the regulatory tightrope more carefully. “It seems odd that no regulators have questioned the industry’s push for laxer regulation when crypto claims to be innovative. If so, shouldn’t it triumph on a level playing field?” asks Low. SOUTHEAST ASIA EYES HANDS-OFF AI RULES (Reuters) Southeast Asian countries are taking a business-friendly approach to artificial intelligence regulation in a setback to the European Union’s push for globally harmonised rules that align with its stringent framework. Reuters reviewed a confidential draft of the 10-member Association of Southeast Asian Nations’ (ASEAN) “guide to AI ethics and governance,” whose content has not previously been reported. Three sources told Reuters the draft is being circulated to technology companies for feedback and is expected to be finalised at the end of January 2024 during the ASEAN Digital Ministers Meeting. Companies that have received it include Meta, IBM, and Google. EU officials earlier this year toured Asian countries in a bid to convince governments in the region to follow its lead in adopting new AI rules for tech firms that include disclosure of copyrighted and AI-generated content. In contrast to the EU’s AI Act, the ASEAN “AI guide” asks companies to take countries’ cultural differences into consideration and does not prescribe unacceptable risk categories, according to the current version reviewed. Like all ASEAN policies, it is voluntary and is meant to guide domestic regulations. With almost 700 million people and over a thousand ethnic groups and cultures, Southeast Asian countries have widely divergent rules governing censorship, misinformation, public content and hate speech that would likely affect AI regulation. Thailand, for example, has laws against criticising its monarchy. Technology executives say ASEAN’s relatively hands-off approach is more business-friendly as it limits the compliance burden in a region where existing local laws are already complex and allows for more innovation. “We are also pleased to see this guide aligns closely with other leading AI frameworks, such as the United States’ NIST AI Risk Management Framework,” IBM Asia’s vice president of government affairs Stephen Braim said, referring to voluntary guidelines developed by the U.S. Department of Commerce’s National Institute of Standards and Technology. Meta and Google did not respond to requests for comment. The guide, which is meant to be periodically reviewed, urges governments to aid companies through research and development funding and sets up an ASEAN digital ministers working group on AI implementation. Senior officials in three ASEAN countries said they are bullish on the potential of AI for Southeast Asia and believe the EU has been too quick to push for regulation before the harms and benefits of the technology are fully understood. The ASEAN guide advises companies to put in place an AI risk assessment structure and AI governance training, but leaves specifics to companies and local regulators. “We see it as putting ‘guardrails’ for safer AI,” one official told Reuters. “We still want innovation.” The guide warns of the risks of AI being used for misinformation, “deepfakes”, and impersonation, but leaves it to individual countries to work out the best way to respond. Other Asian nations such as Japan and South Korea have flagged similarly relaxed approaches to AI regulation, casting doubts over the EU’s ambition to establish a global standard for AI governance based on the rules that would apply to its 27 member states. u
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