7.11 AI Daily Report AI Regulation Upgrade: EU Takes Strong Action, US Seeks Clarity, China May Change Its Stance

1. Headline

1. The EU has released AI practice guidelines, with penalties of up to 7% of revenue for violations.

The European Commission announced the "AI Practice Guidelines" on July 11, as a transitional mechanism to assist businesses in complying with the "AI Act." The guidelines focus on copyright protection and improving the transparency of large AI models, and will apply to large generative AI models such as ChatGPT and Claude as early as August.

According to the guidelines, developers are not allowed to use pirated content to train AI models. Once the creator clearly states that they do not want their work to be used for training, developers must respect and exclude the relevant content. Violators may be fined up to 7% of their revenue.

The guideline aims to protect the rights of creators while enhancing the transparency and interpretability of AI models. In the future, developers will need to disclose key information such as the sources of training data and training methods. Industry insiders believe that this move will drive the AI industry towards a more compliant and transparent direction, but it may also increase the compliance cost burden for companies.

2. OpenAI has been accused of violating lobbying regulations, raising questions about Musk's influence.

OpenAI has requested California regulators to investigate a nonprofit organization, "Artificial Intelligence Nonprofit Integrity Alliance," that challenges its commercialization plans, accusing it of violating state lobbying laws, and has once again raised questions about the organization's relationship with Musk.

OpenAI's complaint indicates that the organization may have fabricated the identity of its responsible party and failed to report lobbying expenses related to a now-weakened state bill. The bill could have originally hindered the ChatGPT manufacturer's transition to a profit-making entity.

Analysts believe that OpenAI's move aims to clear obstacles for its commercialization. However, it has also intensified suspicions about whether Musk is manipulating things behind the scenes. Musk has publicly criticized OpenAI's commercialization direction and stated that he would start a new AI company to compete with it.

3. Microsoft executive: AI helps the company save over $500 million, but still lays off 15,000 people.

Microsoft executives revealed that the company saved over $500 million through AI in the past year, with 35% of new product program code written by AI. However, at the same time, about 15,000 employees have been laid off this year, raising concerns about employment and industrial transformation.

Microsoft's Business Chief Althoff stated that AI tools have saved the company over $500 million in customer service centers and improved employee and customer satisfaction. However, at the same time, Microsoft has laid off around 15,000 employees this year, accounting for about 5% of its total workforce.

Analysis indicates that while AI can improve business efficiency, it is also reshaping the job market. In the future, some jobs will be replaced by AI, but at the same time, new job opportunities will be created. Both enterprises and practitioners need to make timely adjustments to adapt to this transformative trend.

4. Cryptocurrency financing is cooling off, and founders are finding it difficult to secure funding.

The article analyzes the difficult environment for cryptocurrency financing, pointing out that the decrease in capital returns has led to a decline in net VC funding, making it harder for founders to raise capital.

As the cryptocurrency market continues to languish, investors' enthusiasm for crypto projects has significantly waned. Data shows that the total amount of cryptocurrency financing in the first half of 2023 was only $5.8 billion, a year-on-year decline of 37%.

At the same time, the capital returns of VC funds are also decreasing. In the past year, the total capital return of cryptocurrency VC funds was only $650 million, a decrease of 75% compared to the previous year. This has resulted in a significant reduction in the net capital available for VC investment.

In the context of funding shortages, VC institutions are more inclined to invest in leading projects rather than emerging startups. This makes it more difficult for ordinary founders to secure financing. Analysis indicates that only projects that truly possess innovative products and business models can stand out in the current environment.

5. The Ethereum Foundation is restructuring its ecological development strategy, focusing on user growth and infrastructure.

The Ethereum Foundation has announced a restructuring of its ecosystem development strategy, aimed at maximizing the number of users of Ethereum and enhancing the resilience of its technological and social infrastructure.

The foundation stated that the ecosystem development team will focus on two main goals: first, to directly or indirectly increase the number of Ethereum users, allowing them to benefit from the underlying value; second, to enhance the resilience of Ethereum's technology and social infrastructure.

To achieve this goal, the foundation will increase its investment in Ethereum educational resources and closely collaborate with community builders, developers, and others to promote the continuous development of the ecosystem. It will also focus on infrastructure construction related to privacy, scalability, and other aspects.

Analysis suggests that this adjustment reflects Ethereum's development towards popularization and industrialization. In the future, Ethereum will not only require technological innovation but also need to attract more ordinary users to join, thus forming a positive cycle and promoting the development of the entire ecosystem.

2. Industry News

1. Bitcoin breaks $118,000 to reach a new all-time high, driven by institutional demand and macroeconomic factors.

The price of Bitcoin has surpassed $118,000, setting a new historical high. This milestone reflects market excitement and structural strength. This round of increase is distinctly different from the "retail leverage topping" seen at previous peaks, with overall leverage usage being limited and funding rates only slightly turning positive. The real driving force comes from the continuous inflow of spot ETFs and corporate allocation demand.

Bitcoin ETFs have accumulated $49 billion in funds, with institutions steadily entering the market. Meanwhile, July is a strong month for Bitcoin, and combined with Washington's "Crypto Policy Week," the market is welcoming a resonance of favorable policies and macroeconomic conditions. The "GENIUS Act" is accelerating its review process in Congress and is expected to have a substantial impact on stablecoin regulation and the adoption of digital assets.

Analysts indicate that although prices have reached new highs, the funding and position structure shows that the market has not fully absorbed these positive factors, leaving room for further increases. However, the market also faces supply tightening and the accumulation of volatility, which may lead to significant price fluctuations.

2. The Ethereum ecosystem is undergoing a comprehensive upgrade, expanding the user base and enhancing the resilience of the infrastructure.

The Ethereum Foundation has released a new vision, initiating structural reforms with two main objectives: expanding the user base and enhancing the resilience of the infrastructure. The new reforms optimize the support system and funding management through four strategic pillars, actively participating in ecosystem development and policy coordination to address long-term challenges and promote the implementation of key applications.

The Ethereum ecosystem is adapting to these needs, and the foundation is ready to play its role. The goal is to enable more people to use Ethereum directly or indirectly and benefit from it; while maximizing the resilience of Ethereum technology and social infrastructure.

In addition, the L1 zkEVM is about to launch on the Ethereum mainnet, which will significantly increase the Gas limit and achieve native zk-rollup support without sacrificing security, liveness, and censorship resistance. These teams are dedicated to eliminating bottlenecks in practical use, helping users to quickly and efficiently utilize Ethereum.

3. GMX suffered a hacker attack resulting in a loss of 42 million USD and will discuss compensation measures.

The centralized perpetual contract exchange GMX suffered a hack on its V1 deployment on Arrum on July 9, resulting in losses of up to 42 million dollars. GMX released a detailed report, revealing the fundamental reasons for the attack, initial response measures, and subsequent plans.

After analysis by the security team, the attack originated from a reentrancy vulnerability in the OrderBook contract. The hacker exploited this vulnerability to manipulate the average short price of BTC, significantly increasing the price of GLP and making a profit. The official has suspended related transactions on the Avalanche chain and confirmed that the V2 version is not affected.

GMX will implement measures such as disabling GLP minting and redemption, and establishing a compensation pool. At the same time, it reminds V1 fork projects to promptly fix similar risks. Hackers have begun to return part of the funds, including 5.49 million FRAX and 3,000 ETH. GMX stated that it will further discuss specific plans for compensating users.

This incident once again highlights the importance of security audits in DeFi. Industry insiders are calling for strengthened code audits, increased project transparency, and avoidance of similar vulnerability risks.

4. The performance of altcoins is diverging, with popular projects like Sui continuing to strengthen.

In the bullish environment led by Bitcoin, altcoins are showing significant divergence. Some popular projects continue to strengthen, such as Sui rising 12.19% to $3.44, Cardano up 12%, and Dogecoin and Sui both up 10%. Analysts expect that if Sui can maintain above $3.7, the next target could be $6.

Meanwhile, some altcoins have lagged in their price increases. Although Dogecoin (DOGE) has strengthened in the short term, analysts believe its gains may lag behind Bitcoin, with an expected price range of $0.33 to $0.4 by the end of the year. XRP has briefly broken through $2.65, but whether it can further rise to $4-6 still requires observation over time.

Overall, the performance of altcoins may be worse than expected, forcing industry participants to re-evaluate innovation and real use cases. The Gate Research Institute points out that during this period, although small and medium market cap tokens saw increased volume, they remained stagnant, reflecting divergent expectations in the market regarding their future performance.

5. The cryptocurrency financing environment continues to deteriorate, and the industry has yet to see the dawn of recovery.

During the TOKEN2049 conference, several industry insiders expressed pessimism about the industry's outlook. Some entrepreneurs and investors believe that the entire industry is facing a "sense of disillusionment," and the traditional logic and exit mechanisms of cryptocurrency projects have come to an end.

The industry downturn is not only due to the macro environment but more so the phased death of underlying logic. The traditional path of "founding projects - VC packaging - user growth hacking - listing on exchanges - exiting and lying flat" is no longer viable. Some once-promising sectors such as NFTs and gaming are developing slowly and facing skepticism.

At the same time, the financing environment continues to deteriorate. The decrease in capital inflow has led to a decline in the net amount available for VC investment, making it more difficult for founders to secure funding. Industry participants are calling for a renewed focus on innovation and real use cases, breaking free from the vicious cycle of excessive hype and speculation.

The current low point is indeed severe, but it also provides an opportunity for reflection and reshaping. Only by adhering to long-termism and focusing on practical application value can the industry regain vitality and welcome a new dawn.

3. Project News

1. Agora completed a $50 million Series A funding round to promote the construction of stablecoin infrastructure.

Agora is a company focused on the infrastructure development of stablecoins. The company aims to provide enterprises with a one-stop solution for issuing and managing stablecoins, including institutional-grade custody services, deep liquidity support, and more. Agora has launched a white-label stablecoin product, enabling brands to issue quickly.

On July 10, Agora announced the completion of a $50 million Series A funding round led by Paradigm, with a total funding amount of approximately $62 million. This round of financing will be used to drive the establishment of stablecoin infrastructure on 13 blockchain networks, focusing on the development of programmable stablecoins. Unlike traditional issuers, Agora adopts a profit-sharing model to encourage the adoption of the platform.

This round of financing highlights the growing demand from enterprises for stablecoin infrastructure. As the application of cryptocurrencies continues to expand in areas such as payments and settlements, stablecoins will play an increasingly important role. Agora provides companies with a way to integrate digital dollars without complex systems, helping to accelerate the application of stablecoins in traditional finance.

Industry analysts believe that Agora's financing further validates the importance of building stablecoin infrastructure. The stablecoin ecosystem requires specialized infrastructure support to ensure security, compliance, and efficiency. The rise of companies like Agora will drive the stablecoin ecosystem towards a more mature and standardized direction.

2. The Sui ecosystem continues to gain momentum, and Move-related projects are attracting market attention.

Sui is a Layer 1 public chain based on the Move language, developed by Mysten Labs. As one of the representative projects of the Move ecosystem, Sui has recently attracted widespread attention in the market.

During the TOKEN2049 conference in Singapore, the Sui ecosystem attracted a lot of attention. The Sui Builder House became one of the most popular events before the conference, drawing in numerous developers and investors. Meanwhile, the Sui token SUI experienced a surge in the secondary market, achieving over 1000% growth in a short period.

The continuous efforts of the Sui ecosystem stem from the growing influence of the Move language among developers. The Move language is highly related to the Rust language, allowing projects in the Solana ecosystem to migrate to Sui relatively easily. In fact, a well-known project in the Solana ecosystem, Solend, has launched a similar product called Suilend on Sui.

Analysts point out that the rise of Sui and other Move-based projects reflects a shift in the cryptocurrency ecosystem. As the ecology of leading public chains like Ethereum becomes increasingly saturated, developers and capital are seeking new tracks. The design philosophy of the Move language aligns with blockchain and is expected to become the next generation smart contract language.

However, the Move ecosystem is still in its early stages, with a lack of star projects and tradable assets. Whether the Sui ecosystem can continue its current momentum remains to be seen over time. Undoubtedly, the Move ecosystem has become one of the most关注的新兴赛道之一.

3. OpenAI is complained against by a nonprofit organization, AI regulatory disputes arise again.

On July 11, according to Politico, OpenAI filed a complaint with California's political finance regulator against an organization called "Artificial Intelligence Nonprofit Integrity Alliance," accusing it of violating state lobbying laws.

OpenAI claims that the organization may have fabricated the identity of its leader and did not report lobbying funds related to a state bill that has now been weakened. The bill could have originally prevented ChatGPT's manufacturer, OpenAI, from becoming a for-profit entity.

This complaint has once again raised questions about the relationship between OpenAI and Musk. OpenAI was once closely related to Musk, who was also one of the early investors in the company. There were rumors that Musk might have some association with the organization.

The accusations against OpenAI reflect the complexity of AI regulation issues. On one hand, AI companies call for relaxed regulations to promote innovation; on the other hand, regulators are concerned about the potential risks of AI technology. A continuous tug-of-war has formed among the stakeholders.

Analysts say that OpenAI's move aims to create a favorable environment for the upcoming IPO. However, it also highlights the contentious nature of AI regulation, which may become an even more challenging issue in the future. As AI technology continues to develop, establishing a reasonable and effective regulatory framework will be a challenge that all parties need to face together.

4. Economic Dynamics

1. Federal Reserve officials signal dovish stance, triggering market expectations for interest rate cuts.

Economic background: The US economy maintained moderate growth in the first half of 2023, but the inflation rate remained high, far exceeding the Federal Reserve's 2% target. June employment data was strong, and the job market remains tight. However, signs of slowing economic growth and weak consumer spending are becoming increasingly evident, and inflationary pressures have eased.

Important events: Federal Reserve Governor Waller stated in a speech at the Dallas Fed that the current policy interest rate level is too high and that a rate cut may be discussed at the July meeting. He believes that inflation has clearly cooled, the job market is stabilizing, and recent price increases caused by tariffs are limited to specific goods. San Francisco Fed President Daly also expects two rate cuts in 2025 and noted that the impact of tariffs on prices is milder than expected.

Market Reaction: Investors reacted positively to the dovish remarks from Waller and Daly, generally expecting the Federal Reserve to begin a rate-cutting cycle in the second half of this year. U.S. stocks rose, with the S&P 500 index up 0.92%. U.S. Treasury yields fell, with the 10-year Treasury yield dropping to 3.83%. The dollar index edged lower. The cryptocurrency market also saw an uptick, with Bitcoin breaking the $112,000 barrier.

Expert Opinion: Goldman Sachs analysts have indicated that, given the easing of inflationary pressures, the Federal Reserve may cut interest rates by 25 basis points in September. Polymarket traders assign a 50% probability to the Fed lowering rates twice this year. However, some experts warn that if the job market remains overheated, inflation could rise again, at which point the Fed may be forced to raise rates again. Overall, most analysts believe that the Fed has entered a critical period of policy shift.

2. The Chinese regulators are considering a digital RMB stablecoin strategy.

Economic Background: China is the world's second-largest economy and is actively promoting the development of the digital renminbi. However, it has taken a strict regulatory stance on cryptocurrencies, banning crypto trading and mining activities. With the rapid development of the digital economy, China is reassessing its strategy in the field of digital assets.

Important Event: According to reports, the National Administration of Financial Regulation of China is considering strategic responses to digital assets such as stablecoins. Tech giants in places like Shanghai are seeking approval for RMB-backed stablecoins to enhance China's position in the global digital economy.

Market Response: The news has triggered a strong reaction in the cryptocurrency market. Major cryptocurrencies like Bitcoin and Ethereum have seen a rise in the short term. Investors' expectations have increased regarding China's potential easing of regulatory policies. However, some analysts have stated that China will still maintain strict regulations on stablecoins to control potential risks.

Expert Opinion: Chen Hao, director of the Digital Finance Research Center at Tsinghua University, believes that China is seeking to dominate the digital asset space, and the Renminbi stablecoin could become an important lever. However, he also pointed out that the complexity of regulation requires careful consideration. Senior analyst Zhang Yong stated that the push from enterprises and international competitive pressure have facilitated policy changes, but the development of stablecoins faces regulatory challenges.

3. The EU has published guidelines for AI practices aimed at protecting copyright and increasing transparency.

Economic Background: Artificial intelligence is becoming a key force driving economic growth. The European Union is an important player in the global development of artificial intelligence, striving to find a balance between technological innovation and ethical regulation. With the rise of large generative AI models, issues of copyright protection and transparency are becoming increasingly prominent.

Important event: The European Commission announced the "AI Practice Guidelines" on July 11, serving as a transitional mechanism to assist businesses in complying with the upcoming "AI Act." The guidelines focus on copyright protection and increasing the transparency of large AI models, and they are set to take effect as early as August for models such as ChatGPT and Claude.

Market reaction: After the announcement, the stock prices of tech giants showed a divergence. AI companies like OpenAI saw their stock prices drop due to the potential for stricter regulations. Meanwhile, some traditional tech companies experienced an increase in stock prices as they are expected to benefit from AI guidelines. Overall, the market's reaction to AI regulation is cautious.

Expert Opinion: The European Commission stated that the AI guidelines aim to prevent developers from using pirated content to train AI models and require respect for creators' rights. However, some analysts point out that overly strict regulation could hinder AI innovation. UK AI expert Toby Walsh believes that the EU should adopt a balanced approach to encourage responsible AI development.

5. Regulation & Policy

1. The EU has released the "AI Practices Guidelines," and large AI models such as ChatGPT may face a 7% revenue fine.

The European Commission announced the "AI Code of Practice" on July 11, (General-Purpose AI Code of Practice), as a transitional mechanism to assist companies in complying with the "AI Act." The code focuses on protecting copyright and enhancing the transparency of large AI models, and will apply to large generative AI models such as ChatGPT and Claude as early as August.

According to the guidelines, developers must not use pirated content to train AI. If creators clearly express their unwillingness for their works to be used for AI training, developers must respect and exclude the relevant content. Once there is a suspicion of infringement in the content generated by AI, operators must have a set of procedures to address and rectify such issues. Violators may be fined up to 7% of their revenue.

The guideline aims to protect the rights of creators while enhancing the transparency and interpretability of AI models. Industry insiders believe this is an important step in laying the groundwork for AI regulation by the European Union. However, how to define "pirated content" and infringement remains to be clarified.

Experts say that although the guidelines are temporary, their impact on AI companies cannot be ignored. Large AI companies like OpenAI need to reassess their training data and models to comply with the new regulations. Small and medium-sized enterprises face greater pressure and may be forced to reduce their AI operations. Overall, these guidelines may accelerate the improvement of internal compliance mechanisms within the AI industry.

2. Chinese regulators explore responses to the development trends of cryptocurrencies and stablecoins.

According to reports, the Shanghai Municipal State-owned Assets Supervision and Administration Commission recently held a central group study meeting focusing on the development trends and response strategies of cryptocurrencies and stablecoins. This marks a potential "significant" shift in China's regulatory stance on cryptocurrencies.

The meeting discussed the rapid development of digital assets globally. Experts in attendance believe that China should pay close attention to the impact and challenges that stablecoins pose to the traditional currency system. Some individuals have called for China to consider issuing a stablecoin pegged to the renminbi to counter the dominance of the US dollar.

China has previously maintained a strict stance against cryptocurrency trading and mining. However, with the development of the digital economy, the demand for new digital assets such as stablecoins has been increasing day by day among enterprises and regulators. Industry insiders point out that stablecoins have broad application prospects in areas such as cross-border payments and trade financing.

However, the regulatory challenges of stablecoins have also attracted attention. Experts say that excessive issuance of stablecoins may undermine monetary sovereignty and bring financial risks. Therefore, there is an urgent need to establish relevant laws and regulations to incorporate stablecoins into the regulatory framework of sovereign currency.

Overall, the Shanghai conference reflects that China may undergo a shift in its cryptocurrency policy. In the future, China may adopt a more open and cautious attitude towards the compliance and application scenarios of stablecoins.

3. The U.S. Senate plans to release the "CLARITY Act", bringing regulatory certainty to cryptocurrencies.

According to reports, the U.S. Senate plans to unveil the highly anticipated "CLARITY Act" next week, aimed at establishing a stronger and clearer regulatory framework for digital assets. The release of the bill will coincide with "Cryptocurrency Week" scheduled for July 14 to 18.

The "CLARITY Act" was jointly proposed by Senators Lummis and Gillibrand, aimed at addressing the legal uncertainties plaguing the cryptocurrency sector. The bill will clarify which digital assets are classified as securities, commodities, or other categories, thereby determining their regulatory bodies.

Previously, the U.S. Securities and Exchange Commission ( SEC ) and the Commodity Futures Trading Commission ( CFTC ) had differing views on the regulation of crypto assets, which led to significant compliance risks for industry participants. The CLARITY Act may create a more defined regulatory environment for crypto companies.

Industry insiders reacted positively to this. Cryptocurrency exchange Coinbase stated that the bill will bring much-needed regulatory certainty to the industry, helping to attract more institutional investors. However, there are also viewpoints suggesting that overly strict regulations could stifle innovation.

Overall, the "CLARITY Act" is seen as an important step in the regulation of cryptocurrency in the United States. Its introduction may accelerate the development of the industry, while also potentially bringing new compliance challenges.