All About EU AI Act: The World's 1st Legal Framework for Artificial Intelligence

On March 13, 2024, the European Parliament adopted the Artificial Intelligence Act (AI Act) that was proposed by the European Commission on April 21, 2021, and it is expected to enter into force at the end of the legislature in May.

The EU's AI Act is the first comprehensive legal framework for AI in the world, establishing rules on data quality, transparency, human oversight, and accountability across the Europe. The act also aims to ensure that AI systems respect fundamental rights, safety, and ethical principles, and address risks of very powerful AI models.

The AI Act divides technology into categories of risk hazards — Unacceptable, High, Medium, and Low. Technology that is considered "unacceptable" will be banned. The act also aims to guarantee the safety and fundamental rights of people and businesses when it comes to AI, and strengthen uptake, investment, and innovation in AI across the EU.

Below're some prominent features of the AI Act:

Risk-Based Approach: The Act classifies AI systems based on the risk they pose, ranging from 'unacceptable' risks, which are banned, to 'high-risk' systems, which are authorized but subject to strict requirements.

Fundamental Rights: The Act ensures that AI systems respect fundamental rights, safety, and ethical principles.

Annex III: This annex is crucial as it lists AI applications that must comply with most of the Act's requirements.

Effect on The Global Technology Landscape

The EU AI Act is expected to have a significant impact on countries around the globe, similar to the influence of the EU's General Data Protection Regulation (GDPR). Here are some ways it could affect other nations:

Global Standard: The EU AI Act may set a new global standard for AI regulation, influencing other countries to adopt similar measures. 

Tech Companies Compliance: Global tech companies operating in the EU will need to comply with the Act, which could lead to changes in their AI systems worldwide.

Innovation and Regulation Balance: The Act aims to balance innovation with robust regulation, which could serve as a model for other countries looking to regulate AI without stifling technological advancement. 

Global Digital Rule-Maker: The EU's role as a global digital rule-maker could be strengthened, potentially leading to a broader adoption of its regulatory framework.

Risk Awareness: The Act raises awareness of the risks associated with AI applications, which could influence global discourse and policy-making.

Overall, the EU AI Act could redefine the tech landscape by setting precedents for AI governance that other countries might follow.

Forex Regulation in the EU

Some Forex brokers are proud to report that they provide their services within the framework of European regulation. It is a kind of sign of quality for many traders.

Legal basis of Forex regulation in the EU

It is immediately worth noting that the European Union doesn’t have a single regulator, unlike other countries. However, this does not mean that no one controls Forex brokers in Europe. Each member state of the EU has its organization, whose functions include the regulation of activities in the financial markets. In contrast, each of the regulators has its own rules and requirements within the framework of their countries’ legislation.

In some countries, the regulators are the Central Bank (Ireland, Czech Republic), and in some countries, these are specially created organizations. The most famous of them are:

• The Financial Conduct Authority (FCA) of the United Kingdom;
• Federal Office of Financial Control (BaFin) of Germany;
• Cyprus Securities and Exchange Commission (CySEC);
• Malta Financial Services Authority (MFSA).

Despite this, each regulator sets its own requirements for Forex brokers, which may differ. Their regulation of activities in the foreign exchange market is regulated by a key document for all EU countries.

Requirements and features of the MiFID II Directive

One of the key features of the MiFID II directive is the possibility of so-called passporting within the EU. A Forex broker with a MiFID II license issued by one of the regulators has the right to operate throughout the EU, not only in the country whose regulator issued this license.

As mentioned above, each regulator makes its own requirements to the applicant. In turn, the MiFID II directive defines a minimum threshold for regulation, and the management of the regulator can tighten them following its national legislation.

For this reason, most Forex brokers seek to obtain a MiFID II license from the regulators of Malta and Cyprus, where they are not subject to such strict requirements as, for example, in the UK.

In general, the MiFID II directive is not a strict law but rather defines the framework within which the EU countries’ Forex regulators are required to carry out their activities.

Accordingly, some regulators are content with the minimum, while others are on the path of tightening their requirements to the directive’s values. The MiFID II directive has become a fairly effective tool and the companies from Forex broker ranking 2021 who have received a license enjoy very high confidence among traders.

How to choose a reliable Forex Broker

Since there is a large-scale competition between Forex brokers, they offer a whole range of different opportunities and advantages. However, choosing a broker is not an easy task for both new and experienced traders. Several key points, such as regulation and capitalization, estimate the reliability and competence of the organization. Certain objective criteria can measure these indicators.

However, when choosing a Forex broker, the most important thing is to determine which parameters are of interest to you. Considering your needs and your trading style, you will be able to detect not only outstanding characteristics but also potential bottlenecks.

Here is a list of questions that we suggest you decide on when choosing a broker:

• Areas of activity of a Forex broker.
• Is the broker/dealer activity regulated? If so, in which country is the regulation implemented
• How reliable is the broker's trading platform?
• Capitalization
• Is the company a broker or a dealer?
• Customer support
• Expenses: Structure of payments and commissions
• Account Types
• Does the broker offer any additional services?
• How are leverage and margin calls calculated?

You need to know this

Not all countries regulate in the same way, and they have different characteristics and requirements for financial registration.

Therefore, any investor/trader is recommended to choose a Forex broker registered in a country where a regulatory agency controls its activities. In addition, it is important to know whether the broker/dealer’s activities are regulated in an offshore territory or not since registration requirements are usually much more liberal in offshore countries.

How reliable is the broker's trading platform?

Depending on a particular trader’s hardware and software features, they may need either an installed program or an online application. Choosing the optimal platform for yourself is crucial for successful trading. Take a look at Forex broker ranking 2021 and decide about the best one.

In addition, it is essential to make sure that the trading platform is not subject to frequent crashes or freezes, especially during the release of economic news of global significance or global events when traders need a stable operation of the system.