Pongo Points 12/14/23

Chinese IDs on the blockchain | Using AI for government filings | Google faked its AI demo | New crypto accounting rules | Bank regulations allow for more crypto holdings

1. China Readies Launch of Digital IDs on the Blockchain

Why it’s interesting: China’s Ministry of Public Security is implementing a nationalized digital identification system (or “DID”) in collaboration with Blockchain Service Network (BSN), a full-service blockchain deployment agency based in China.

What stands out: BSN is effectively a CCP entity that is operated in collaboration with China Mobile and China UnionPay, which are both state-owned service companies.

What’s next: Analyzed alongside country’s recent push to force large social media accounts to use their real names, it seems that China is gearing up for the complete digitization of citizen records despite security and privacy concerns.

2. Microsoft Using AI to Crunch Nuclear Regulation Processes

Why it’s interesting: As AI becomes a tool for organizations to streamline menial tasks, Microsoft is partnering with Terra Praxis, a non-profit focused on promoting clean energy, to speed up regulatory paperwork and filings for new nuclear energy sites.

What stands out: Because of the highly structured nature of nuclear power plant permitting documents, Terra Praxis believes that AI tools might cut the amount of human hours spent on paperwork by as much as 90%.

What’s next: While the use of AI might speed up document filings, it might also present a “chicken-and-egg” problem: Can government agencies and regulators keep up with the larger inflow of documentation and approve new nuclear power plants?

3. Google Misrepresented Project Gemini’s Capabilities

Why it’s interesting: Google’s showcase of it’s impressive Gemini AI model was heavily edited to make it seem far more capable than it is today, as it appeared as though the AI was interacting with a user in real time.

What stands out: Google used real prompts and stitched snippets of them together creatively, which many viewers found to be dishonest - despite Google simultaneously launching a “How Its Made” blogpost that went into detail on the total amount of prompts used.

What’s next: While Google’s savvy marketing tactic wasn’t well received by many, Project Gemini remains a leading artificial intelligence model with tremendous capabilities.

4. New Crypto-Accounting Rules for Companies

Why it’s interesting: The Financial Accounting Standards Board (FASB) changed its standard for crypto accounting so that companies may now disclose the fair market value of crypto assets on their balance sheet.

What stands out: Under previous guidance, companies were required to show losses “incurred” by holding crypto assets, but were not able to “mark up” gains until the assets were sold - which caused some confusion for investors as to the company’s true financial standing.

What’s next: While innocuous to most people, these changes will only serve to strengthen the disclosures made by companies that hold crypto assets.

5. International Bank Regulator Warms to Banks Holding Crypto Assets

Read it on the Bank of International Settlements website here: Prudential treatment of cryptoasset exposures

Why it’s interesting: As the banking industry continues to warm up to crypto (despite Jamie Dimon’s recent comments), the Basel Committee on Banking Supervision (BCBS) issued revised guidelines for banks holding crypto assets, allowing for more flexibility for crypto-friendly institutions.

What stands out: The updated standard permits banks to hold twice the amount of “unbacked cryptoassets” (referenced as “Group 2”) than the prior rules, but has a far more focused emphasis on banks holding stablecoins (referenced as “Group 1”).

What’s next: The committee plans to monitor certain crypto assets for inclusion in Group 1, suggesting that highly-developed and permissionless protocols like Bitcoin and Ethereum might be reclassified as “stable” assets that can be included in a bank’s Tier 1 capital.

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