Emerging Compliance in the Generative Decentralized Era

Authors

Nizan Geslevich Packin

First Page

83

Abstract

Is it the end of compliance as we know it? Emerging technologies such as Artificial Intelligence (“AI”), including Generative AI (“GenAI”), and blockchain are reshaping regulatory compliance in the Web 3.0 era. As machine-generated data becomes the norm, traditional models reliant on human oversight are becoming obsolete, necessitating swift adaptation from regulators and industry stakeholders. Historically, compliance was designed to be managed by humans due to the need for critical thinking, ethical considerations, and nuanced decision-making. Yet, in today’s era, this approach is no longer viable. Addressing this need, Regulatory Technology (“RegTech”) has played a key role in modernizing compliance through automation and data analytics. Nevertheless, emerging technologies keep presenting new challenges with data integrity, privacy, cybersecurity, IP rights infringement, and regulatory evasion. For instance, more data is synthetic or AI-generated, often used without individuals or businesses knowing, which introduces new complexities and challenges. Likewise, smart contracts and oracles, which are algorithmic and often operate with minimal human supervision, are becoming more commonly used in compliance frameworks. These complexities demand robust, adaptable regulatory frameworks and interdisciplinary efforts. Examples include the Department of Justice’s updated Evaluation of Corporate Compliance Programs, the Federal Trade Commission’s plan to crackdown on deceptive AI claims, the Securities and Exchange Commission’s 2025 Examination Priorities announcement, and the Evidence Act’s Federal Chief Data Officers Council’s work. In particular, the impact of GenAI and blockchain necessitates innovative compliance models capable of managing the volume and complexity of digital data. There’s a pressing need for frameworks that leverage these technologies for proactive risk management and enhanced regulatory oversight. The emergence of digital technologies signifies not the end of compliance, but a crucial evolution. Advocating for agile, data-centric compliance strategies, the shift towards integrating AI and blockchain aims to make regulatory mechanisms more transparent, fair, and efficient. Moving from human-centric to system-driven governance is essential for the integrity and future of compliance, marking a significant evolution rather than an end.

Recommended Citation

Nizan G. Packin, Emerging Compliance in the Generative Decentralized Era, 19 Brook. J. Corp. Fin. & Com. L. 83 (2024).
Available at: https://brooklynworks.brooklaw.edu/bjcfcl/vol19/iss1/5