Updates on Global Technology Regulations
1. INDIA – NASSCOM RELEASES GUIDELINES ON GenAI
The guidelines1 are a set of best practices for the responsible development and use of Generative AI (“GenAI”) technologies. They aim to promote trust and transparency and mitigate the potential harms associated with these technologies. The guidelines shall cover those who are engaged in research, development and use of GenAI and aimed at Mitigation of misinformation, IPR infringement, privacy harms, large scale job displacements cyber-attacks and harmful environment impact.
Per the guidelines, the Researcher will have to demonstrate reasonable caution, foresight, transparency, accountability, reliability, safety, inclusion and progress of humanity as a whole. The Developers and Users of GenAI, apart from the above safeguards, will have to rely on other critical guiding frameworks such as NASSCOM’s Responsible AI Governance Framework, OECD AI Principle etc.
Fountainhead Legal View
The guidelines cover everybody from a Researcher to a Developer and even the end User exploiting GenAI for commercial as well as personal purpose. Although these are just guidelines, they are an indication of the expected legislation to regulate GenAI. It will help the Researchers, Developers and even the Users to adhere to them and streamline their systems and products basis the protocols per the guidelines which shall keep revising basis further updates and developments.
EUROPEAN UNION (EU) – LANDMARK CRYPTO LAW INTRODUCED
The Markets in Crypto-Assets Regulation (“MiCA”) 2 has been passed by the European Parliament and made officially operational for all EU members. All the existing legislations of EU countries shall be required to align their laws basis the provisions of MiCA.
MiCA will be fully functional between mid-2024 and early-2025. The timeline for implementation of multiple provisions of MiCA are:
• On 30th June 2024: Provisions on E-money Token and Asset Reference Token will become applicable. This will include stablecoins.
• On 30th December 2024: Provisions regarding crypto-assets service providers and other crypto-assets will become applicable as developed by European Banking Authority.
In terms of compliances, crypto-asset service providers will be required to adhere to guidelines, such as that the crypto-asset service providers:
• must be authorised by a financial regulator in the EU.
• must be transparent about their business operations and risks.
• must protect consumers from fraud and market abuse.
• must include measures to mitigate the risks that crypto assets pose to financial stability.
Fountainhead Legal View
MiCA is being viewed as a regulation for ending the era of unregulated crypto currencies. Its potential impact may extend beyond EU, as it may set a new global standard for crypto regulation, much like the General Data Protection Regulation of EU did for data privacy.
Instead of focusing on the question of who will regulate the digital asset space, the EU has shifted its attention to how to regulate it. This proactive approach of the EU could potentially bring significant changes and have a transformative impact on the regulation of digital assets. Other countries like UK, Australia and Hong Kong are already considering MiCA as a base for developing a similar regulation and implementing in their respective jurisdictions.
MiCA imposes stringent anti-money laundering (AML) and counter-terrorism financing (CTF) obligations on providers. This regulatory framework aims to mitigate criminal activities within the crypto industry. By striking a balance, MiCA provides regulatory clarity and stability while simultaneously promoting innovation and fostering the growth of the sector.
3. HONG KONG – INTRODUCTION OF NEW VIRTUAL ASSET LICENSING REGIME
New regulatory framework for Virtual Asset Trading Platform (“VATP”)3 came into effect on 1st June 2023. The Virtual Asset Licensing Regime requires all VATPs to obtain a license from the Securities and Futures Commission of Hong Kong (“SFC”) before they can operate in the city.
Some of the key requirements as per the regime are:
• Having a fit and proper management team
• Having adequate risk management systems in place
• Having sufficient financial resources
• Complying with all applicable laws and regulations
Fountainhead Legal View
The new regime is expected to increase investor confidence in the VATP industry. By requiring VATPs to obtain a license from SFC, the new regime will send a signal that the Government is taking steps to regulate the industry and protect investors. This could lead to increased investment in the industry and higher trading volumes. However, the process of obtaining license may be time consuming and costly.
4. UNITED KINGDOM (UK) – FCA INTRODUCES RULES FOR MARKETING CRYPTO- ASSETS
The Financial Conduct Authority (“FCA”)4 Rules regulate advertisements related to crypto-assets and shall be enforced from 8th October 2023. Businesses shall ensure that consumers understand the risks involved with no misleading or exaggerated claims.
The target consumers shall not include those who are vulnerable to financial harm like the elderly, low-income groups, or who have a history of gambling addiction. Breach of these FCA rules will be considered a criminal offense with imprisonment of up to 2 years and no limit on fines.
Fountainhead Legal View
FCA Rules are expected to have a significant impact on firms that promote crypto assets. The FCA Rules are designed to protect consumers from the risks associated with crypto assets and they will require firms to take a more cautious approach while undertaking promotional activities. Similar guidelines were announced by the Advertising Standards Council of India in 2022.
5. FRANCE – PARLIAMENT ADOPTS BILL TO REGULATE SOCIAL MEDIA INFLUENCERSINFLUENCERS
On 1st June 2023, the bill meant for Social Media Influencer5 with an aim to curb promotions related to dangerous products and trends was adopted.
Some of the key aspects of the law, which will soon be enacted are:
• It provides clarity on the definition of “Influencer” and “Influencer Agencies”.
• It provides for a protective legal status for underaged influencers.
• It creates an obligation for the undertaking parties i.e., Brand, Influencer and Agencies to enter into a written agreement, and expressly mentions that the online influence activities aimed towards audience located in France will be regulated under the law of the land.
• It provides for monitoring of influencer’s activities by a separate team formed under the Consumer and Competition Agency. It also incorporates provision to hold the platforms liable.
• It creates a mandate for influencers operating from abroad to appoint a legal representative in France and to take out civil liability insurance within EU.
• It bans promotions of certain activities such as cosmetic surgery, promotion of certain financial services etc.
A Guidance Document6 containing rules applicable to influencer has also been released by the Ministry of Economy and Finance. Breach will be considered a criminal offense with imprisonment of up to 2 years and fine of €300,000.
Fountainhead Legal View
The legislation aims to safeguard consumers from deceptive practices and undue influence. It places obligations on various parties and carries potential consequences for non-compliance. Influencers and their management agencies become liable under the law, requiring them to adhere to its provisions.
Brands partnering with influencers also face liability, emphasizing the need to ensure compliance and non-harmful content. Social media platforms can be held accountable for the content posted on their platforms, necessitating proactive moderation and removal of unlawful posts.
6. CHINA – GUIDELINES ON FILING FOR STANDARD CONTRACTUAL CLAUSES FOR CROSS-BORDER TRANSFER OF PERSONAL INFORMATION ISSUED
The Cyberspace Administration of China (“CAC”) guidelines7 took effect from 1st June 2023 and are intended to provide clarity on the requirements for transferring personal information from China to a foreign country. They apply to all entities that transfer personal information to a foreign country, regardless of the size or sector of the entity.
Breach of these guidelines will be considered as an offense and will lead to heavy penalties such as fines of up to RMB 50 million or up to 5% of the violator’s annual revenue with imprisonment of up to 10 years.
Fountainhead Legal View
The impact of the guidelines will vary depending on the size and sector of the company. Larger companies with more complex data processing operations are likely to be more affected by the guidelines.
1 https://nasscom.in/ai/responsibleai/images/GenAI-Guidelines-June2023.pdf
2 https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:52020PC059
3 https://apps.sfc.hk/edistribuOonWeb/gateway/EN/circular/doc?refNo=23EC27
4 https://www.fca.org.uk/publicaOon/policy/ps23-6.pdf
5 https://www.senat.fr/dossier-legislaOf/ppl22-489.html
6 https://presse.economie.gouv.fr/download?id=111917&pn=Guide%20de%20bonne%20conduite%20des%20I nfluenceurs%200623.pdf
7 http://www.cac.gov.cn/2023-02/24/c_1678884830036813.htm
