Arent Fox’s Privacy, Cybersecurity & Data Protection team members were in attendance when the Federal Trade Commission (FTC) held its third FinTech Forum on March 9th, 2017. The Forum focused on the consumer implications of artificial intelligence (AI) and blockchain, two rapidly developing technologies.
AI and blockchain have unlimited potential applications. For example, AI, which focuses on the capability for machines to mimic human thinking or actions, may be used for a number of activities ranging from providing personalized financial services for consumers and assisting with healthcare management, to helping companies with staffing predictions based upon weather patterns. Blockchain technology, on the other hand, involves a distributed digital ledger for recording transactions that can be shared widely, has been used for digital currency, and is now being explored for other uses including payment systems, online voting, and “smart contracts,” which are self-executing contracts converted to computer code.
AI While AI technology has been developing for decades, its potential for widespread applications are surfacing only now, including in areas of financial planning, healthcare, and even in predicting staffing. As such, there are concerns arising from the hand-off of traditionally intimate human-to-human interactions, to human-to-AI interactions. For example, robo advisor now replace human financial planners in online wealth management services that provide automated, algorithm-based portfolio management advice. The AI panel discussed the biases involved in developing AI technology and the values at risk, including privacy, autonomy, fairness, and responsibility. There is also the concern that the data fed into AI systems could be inaccurate or based on systemic biases held by the creators of the algorithms involved. From a legal point of view, AI raises a fiduciary issue in how it is designed; a tort issue in how reasonable decisions are programmed; and privacy issues surrounding notice, consent, data minimization, and automated decision-making. The panel raised the need for self-regulation in the AI space, across different industries.
Blockchain Blockchain technology, on the other hand, is in its early days. Blockchain involves connected computers that reach an agreement over shared data. Like AI, blockchain technology’s applications are limitless, with cryptocurrency such as Bitcoin as the most recognizable example. The panel explored the need for consumer and regulator education in light of the paradigm shift involved in blockchain technology. For example, the use of Bitcoin has denationalized currency and removes the financial institution intermediary that is present in traditional transfers, which raises regulatory and jurisdictional issues. As in any technology that utilizes personal data, there are also privacy and security issues involved in the blockchain application, such as how to provide individuals access to their data when their data is inaccessible because of encryption. The blockchain panelists also called for self-regulation featuring fair (not just minimum) consumer protections and noted that various agencies will need to come together and work with technology innovators to adequately address the issues inherent with blockchain and other emerging technologies.
The FTC’s FinTech Forum demonstrates that regulators are paying attention to the legal, privacy, security, and general consumer protection issues involved in AI and blockchain. It is of utmost importance, therefore, for companies that are considering rolling out these technologies to keep up-to-date on the developments in these areas, notwithstanding the current lack of regulation. On privacy and security, for instance, it is noteworthy that general privacy principles have been historically applied to new and emerging technologies.