Economic Archives | Page 2 of 669 | Digital Watch Observatory

AI investment reshapes euro area markets and financial systems

Philip R. Lane, Member of the Executive Board of the ECB, highlighted in his speech at the ECB-SAFE-RCEA International Conference on the Climate-Macro-Finance Interface (3CMFI) that € area firms with high AI intensity have experienced stronger revenue growth, operating margins, and earnings per share.

The advantage narrows when financial institutions are excluded, and internal funding remains essential, as well-capitalised firms are more likely to adopt AI while smaller firms face investment barriers.

European venture capital and private credit are growing but remain far below US levels, limiting start-up scaling and prompting some to relocate abroad.

Banks are embracing AI extensively, particularly for fraud detection, marketing, chatbots, and credit scoring. Proprietary tools are mostly developed in-house, while specialised external providers support cybersecurity and regulatory reporting.

AI boosts operational efficiency, risk assessment, and credit pricing, yet concentration in a few frontier firms and rising reliance on market-based finance introduce potential financial risks.

Lane noted that monetary policy implications are uncertain, as AI may enhance productivity and incomes differently depending on whether it is labour- or capital-augmenting.

High capital expenditure and increased energy demand during AI adoption could add inflationary pressure, while global concentration of AI activity in the US and China may limit domestic investment, influencing the € area’s natural rate of interest.

The European Central Bank is systematically integrating AI into its analytical and operational environment. Machine-learning tools support forecasting, scenario analysis, and extraction of signals from alternative data, while workflow automation and agentic AI enhance efficiency and reduce manual workload.

The ECB’s digitalisation programme aims to scale AI across business processes, ensuring technology complements expert judgement while maintaining reliability, traceability, and accountability.

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NVIDIA introduces infrastructure-level security model for autonomous AI agents

OpenShell, an open-source runtime introduced by NVIDIA, is designed to support the secure deployment of autonomous AI agents within enterprise environments.

According to NVIDIA, OpenShell applies security controls at the infrastructure level rather than within the model or application layer. The runtime ensures that each agent operates inside an isolated sandbox, where system-level policies define and enforce permissions, resource access, and operational constraints.

The company states that such an approach separates agent behaviour from policy enforcement, preventing agents from overriding security controls or accessing restricted data.

OpenShell enables organisations to define and monitor a unified policy layer governing how autonomous systems interact with files, tools, and enterprise workflows.

Additionally, OpenShell forms part of the NVIDIA Agent Toolkit and is complemented by NemoClaw, a reference stack designed to support the deployment of continuously operating AI assistants.

NVIDIA indicates that the system can run across cloud, on-premises, and local computing environments, while maintaining consistent policy enforcement.

The company also reports collaboration with industry partners, including Cisco, CrowdStrike, Google Cloud, and Microsoft Security, to align security practices for AI agent deployment. Both OpenShell and NemoClaw are currently in early preview.

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Licence revocations hit unregistered crypto firms in Canada

Canada has increased crypto oversight, revoking registrations for nearly three dozen firms due to compliance failures. The move follows investigative reporting that uncovered widespread irregularities in the sector.

The Financial Transactions and Reports Analysis Centre of Canada removed 23 companies in one week, adding to previous actions against about a dozen other crypto firms.

Officials described the shift as part of a broader effort to address risks tied to virtual currencies, including fraud and money laundering.

Findings from the International Consortium of Investigative Journalists’ investigation highlighted clusters of crypto businesses operating without proper registration, particularly in Toronto.

Many of these services reportedly focused on converting digital assets into cash, raising concerns about gaps in oversight and compliance with anti-money laundering rules.

Authorities also flagged suspicious transaction patterns, including activity linked to wallets allegedly associated with Iran-backed groups. While regulators have promised further action, analysts warn that delayed enforcement and structural weaknesses may continue to expose the system to illicit financial flows.

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Sydney set to become hub for AI innovation with Oracle centre

Oracle has launched the AI Customer Excellence Centre (AI CEC) in Sydney to help organisations adopt and scale AI technologies across Australia and Oceania. The centre will act as a hub for collaboration and skills, letting businesses test AI solutions in real-world settings.

The AI CEC provides access to Oracle and partner technologies, with flexible deployment options through Oracle Cloud Infrastructure (OCI). Organisations can receive training, test early-stage AI innovations, and pilot proof-of-concept projects in secure cloud environments.

The centre supports industries such as healthcare, public sector, financial services, and telecommunications, helping companies accelerate AI adoption while improving efficiency and decision-making.

Experts highlight the centre’s potential to bridge the gap between AI experimentation and measurable business impact. Rising compute demand shows AI moving from pilots to production, while hands-on testing helps organisations reduce risk and validate initiatives.

Oracle plans to continue collaborating with governments, partners, and industry to ensure responsible, secure, and trustworthy AI adoption, reinforcing Australia’s position as a leader in the digital economy.

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Tokenised assets set to transform European capital markets

Piero Cipollone, Member of the Executive Board of the ECB, at an event on ‘Building Europe’s integrated digital asset ecosystem: from vision to implementation,’ highlighted Europe’s progress in tokenised financial markets.

Since 2021, European issuers have placed nearly €4 billion in DLT-based fixed-income instruments, including the first digital sovereign debt by EU Member States. Eurosystem trials in 2024 processed €1.6 billion in transactions, showing strong demand for central bank money settlement in digital markets.

Tokenisation enables the full lifecycle of transactions on distributed ledgers, often automated through smart contracts.

Fragmentation across DLT platforms and the absence of a widely accepted on-chain settlement asset are holding back market expansion. Private assets, including stablecoins, carry volatility and credit risks, making a central bank money anchor crucial.

The Pontes platform, launching in Q3 2026, is expected to provide secure settlement across DLT platforms and TARGET services, supporting features like smart contracts and 24/7 operation.

The Appia roadmap outlines a longer-term vision for an integrated European tokenised ecosystem by 2028, covering technical standards, interoperability, collateral management, and cross-border connectivity.

Collaboration between the public and private sectors is critical. Feedback from 64 industry participants shaped Pontes, while Appia engages stakeholders to establish standards and ensure interoperability.

Harmonised legal frameworks are equally important to reduce post-trade fragmentation and support seamless asset transfers across EU Member States. Without coordinated laws, tokenised markets risk inefficiency despite advanced technology.

Europe is building momentum but faces intense global competition. Secure settlement, stakeholder collaboration, and legal harmonisation could make the EU a leader in digital finance with a single tokenised market.

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Pinterest chief calls for stricter youth rules

The chief executive of Pinterest has voiced support for governments banning access to social media for people under 16. He cited rising concerns about mental health, screen addiction and online harms among young users.

He praised the Australian decision to ban social media for under-16s and urged other nations to adopt similar protections. He argued that existing tech safety measures have fallen short of keeping children secure online.

The executive warned that AI enhancements in social platforms may amplify behavioural influence on teens. He compared the inaction by tech companies to past resistance by harmful industries to public health safeguards.

He also highlighted surveys showing parental worries about explicit content and excessive screen time. Pinterest’s view supports calls for clear age limits, better tools for parents and stronger platform accountability.

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AI improves stroke care and reduces patient risks in major study

The system, which analyses medical scans and provides treatment recommendations, was associated with better outcomes compared with standard approaches to stroke care. Researchers said the tool offers a more efficient and scalable method for improving treatment, particularly in resource-constrained healthcare systems.

The findings are based on more than 21,000 patients treated across 77 hospitals in China. Patients supported by the AI-driven clinical decision support system experienced fewer new vascular events, including stroke recurrence, heart attack, or related death, over follow-up periods of up to 12 months.

At three months, new vascular events occurred in 2.9% of patients using the system, compared with 3.9% in those receiving usual care, representing a 26% reduction. The benefit persisted at 12 months, with rates of 4% in the intervention group versus 5.5% in the control group.

Patients receiving AI-supported treatment also showed improved performance on key stroke care quality measures, although no significant differences were observed in disability, mortality, or bleeding outcomes between the groups.

Researchers noted limitations, including the study design, which randomised hospitals rather than individual patients, and potential differences in follow-up care. However, they highlighted the system’s ease of integration into hospital workflows and its potential to strengthen stroke care delivery and long-term prevention strategies.

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AI added to St Helens council strategic risk register

In the UK, the St Helens Council has added AI and digital disruption to its strategic risk register as it seeks to strengthen governance and oversight. The change reflects growing concern about how emerging technologies could affect operations and services.

The updated register, now featuring 12 strategic risks, was presented ahead of the audit and governance committee meeting. UK officials said effective risk management is vital to meeting the council’s objectives and mitigating potential challenges.

AI and digital disruption were cited for the first time alongside risks linked to extreme weather and community cohesion. The council noted that ethical, data privacy and workforce confidence issues are among the challenges associated with integrating AI into public services.

Leaders said other risks, including cybersecurity threats and budget pressures, remain under review. The move comes as local authorities across the UK weigh the impacts of new technologies on service delivery and strategic planning.

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E-commerce agreement expected to move forward on an interim basis at WTO Ministerial

Signatories to the E-Commerce Agreement, negotiated under the WTO Joint Statement Initiative (JSI), are planning to implement the deal on an interim basis despite continued opposition. At least 70 of the 72 countries that endorsed the agreement are expected to sign a declaration to that effect at the next WTO Ministerial Conference (MC14) in Yaoundé.

The move comes as JSI members seek to advance the agreement despite the lack of consensus among the full WTO membership for its incorporation into the Organization’s Annex 4, a step that would require the support of all WTO members. The interim arrangement would take the form of a legally binding treaty among the signatories, expiring upon formal integration into the WTO framework.

The E-commerce Agreement, finalised in July 2024, includes provisions on trade facilitation (e-signatures, paperless trade, single window), personal data protection, and a commitment to refrain from imposing customs duties on electronic transmissions. The latter clause would ensure the continuation of duty-free e-commerce among signatories regardless of the outcome of the broader WTO moratorium on customs duties on electronic transmissions.

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Deepfakes scandal puts Elon Musk and X under scrutiny in France

French prosecutors have escalated concerns about deepfakes linked to Elon Musk’s platform X, alerting US authorities to suspicions that manipulated content may have been used to influence the company’s valuation.

According to the Paris prosecutor’s office, the controversy surrounding sexually explicit deepfakes generated by Grok, X’s AI tool, may have been deliberately amplified to artificially boost the value of X and its associated AI entity ahead of a planned stock market listing in June 2026.

Authorities in France confirmed they had contacted the US Department of Justice and legal representatives at the Securities and Exchange Commission to share findings related to the deepfakes investigation and potential financial implications.

The case builds on an ongoing French probe into X, which initially focused on alleged algorithmic interference in domestic politics. Investigations have since expanded to include the spread of Holocaust denial content and the dissemination of sexualised deepfakes through Grok.

French regulators have taken additional steps, including summoning Musk for a voluntary interview and conducting searches at X’s local offices, actions he has described as politically motivated. Parallel investigations have also been launched in the UK and across the European Union into the use of AI tools to generate harmful deepfakes involving women and minors.

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