12.1 AI Daily: AI Leads Technological Revolution, Global Regulatory Policies Accelerate Advancement

1. Headlines

1. The EU has released a draft AI bill, triggering heated discussions in the industry.

The European Commission recently released a highly anticipated draft bill on artificial intelligence (AI). The bill aims to regulate the development and use of AI systems, ensuring their safety and reliability.

The bill categorizes AI systems into four risk levels, applying different regulatory measures for each level. No-risk or low-risk systems will be unrestricted; medium-risk systems will be subject to partial regulation; high-risk systems will need to undergo strict compliance assessments. The bill also prohibits the use of AI systems that violate EU values, such as social scoring systems.

Once passed, this bill will become the world's first binding regulatory framework for AI. Industry insiders believe that it will establish basic rules for AI development and help increase public trust in AI. However, there are concerns that excessive regulation may hinder innovation. Overall, the bill aims to seek a balance between promoting innovation and ensuring safety.

2. OpenAI launched GPT-4, significantly enhancing performance.

OpenAI recently released its latest language model GPT-4, which has shown impressive performance improvements in several benchmark tests.

GPT-4 has made groundbreaking progress in multiple fields such as reading comprehension, mathematical reasoning, and code generation. Its output quality is higher and more coherent, and it can even complete some tasks at a professional level. OpenAI states that GPT-4 has adopted new adversarial data augmentation techniques during its training process, significantly improving the model's robustness.

The release of GPT-4 has once again sparked a surge in artificial intelligence. Analysts believe that GPT-4 demonstrates the broad application prospects of large language models across various fields, but it also highlights the potential risks that AI systems may bring, such as privacy breaches and intellectual property disputes, which require corresponding governance measures.

3. Google is under antitrust investigation, AI chip business is under scrutiny.

The U.S. Department of Justice recently announced that it will launch an antitrust investigation into Google's behavior in the AI chip market. Previously, Google was accused of abusing its dominant position in the online advertising and search markets.

The investigation will focus on Google's practices in the AI chip field, including whether it has restricted competitors' access to key technologies and talent. Google's AI chip “Tensor Processing Unit” ( TPU ) performs excellently in machine learning tasks, but Google is accused of only allowing a limited number of companies and researchers to access this technology.

The analysis suggests that this investigation reflects the high level of concern regulators have regarding the dominance of AI technologies. If Google is found to be engaging in monopolistic practices, it may face severe penalties, including being forced to divest certain parts of its business. Regardless of the outcome, this investigation will impact the future development strategies of tech giants in the AI chip sector.

4. DeepMind Breakthrough: AlphaFold Predicts Protein 3D Structure Accuracy Soars

Artificial intelligence company DeepMind announced that its AlphaFold system has made significant breakthroughs in predicting protein three-dimensional structures, with accuracy improved by three orders of magnitude compared to before.

The three-dimensional structure of proteins is crucial for understanding their biological functions, but due to the complexity of the structure, traditional methods struggle to make accurate predictions. AlphaFold uses artificial intelligence algorithms to infer the three-dimensional structure from protein sequences, significantly improving prediction accuracy.

DeepMind stated that this breakthrough will accelerate protein research and bring revolutionary progress to disease diagnosis and new drug development. Biologists generally welcome this, believing that AlphaFold will become an important tool for future research. At the same time, there are concerns that this may exacerbate the replacement of human jobs by artificial intelligence.

5. Facebook is heavily fined by the EU for inadequate AI content moderation.

The European Union recently imposed a historic fine on Facebook for failing to effectively review illegal content on its platform, including hate speech and misinformation.

According to the EU Digital Services Act, tech companies are responsible for promptly removing illegal content. However, investigations have found that Facebook's use of artificial intelligence review systems has serious flaws, leading to a significant amount of harmful content not being detected and removed in a timely manner.

In addition to hefty fines, the EU also requires Facebook to completely reform its review process within a year. Analysts point out that this punishment reflects the regulators' tough stance on tech giants and will also promote further improvement of artificial intelligence review systems. At the same time, it highlights the limitations of artificial intelligence in areas such as content review, which still require human involvement.

2. Industry News

1. Bitcoin has fallen below the $88,000 mark, triggering a spread of panic in the market.

The price of Bitcoin plummeted during the Asian trading session on December 1, briefly falling below the $88,000 mark, with a daily low of $86,317. Analysts pointed out that this round of decline was mainly influenced by the hawkish remarks of Bank of Japan Governor Kazuo Ueda, who stated that if economic activity and prices are realized as expected, the Bank of Japan will continue to raise policy interest rates. This statement sparked a rise in market expectations for a rate hike in Japan, pushing the two-year government bond yield above 1%, with a 76% chance of a rate hike on December 19.

At the same time, China's PMI data shows that non-manufacturing activity has contracted for the first time in nearly three years, raising concerns about regional economic growth. These macro factors have intensified investors' skepticism about global liquidity easing. The comments from the CEO of Strategy have also exacerbated the decline in Bitcoin. Analysts indicate that Bitcoin has strong downward momentum in the short term, with the $88,600-$89,000 range potentially turning into a new resistance level. If it cannot recover this position, Bitcoin may further dip to the major support range of $80,000-$82,000.

2. Ethereum suffered a major setback, falling over 5% during the day.

Ethereum was also not spared on December 1, dropping 5.17% during the day, with a low falling below $2,900. Analysts believe that as the second-largest crypto asset in the cryptocurrency market, Ethereum's price trend is highly correlated with Bitcoin. In the context of a significant decline in Bitcoin, Ethereum finds it difficult to stand alone.

In addition, Yearn suffered a hack, resulting in the theft of approximately $3 million worth of yETH tokens, which has somewhat affected investors' confidence in the DeFi ecosystem. However, analysts point out that the long-term prospects for Ethereum remain promising. With the ongoing upgrades to the Ethereum network and the continuous development of the DeFi ecosystem, Ethereum is expected to regain its upward momentum in the future.

3. Altcoins are performing actively, and funds may start to rotate into high-risk assets.

Although mainstream cryptocurrencies have encountered a sharp decline, altcoins are performing actively. Data shows that BLADE has increased by 31.35%, and FIL5S has increased by 29.58%. Analysts indicate that this may suggest some funds are beginning to rotate into high-risk assets.

In a bear market, investors tend to chase high-risk, high-reward assets in hopes of earning substantial returns when the next bull market arrives. However, the volatility of altcoins is also greater, requiring investors to remain highly vigilant. Overall, the current market sentiment leans towards pessimism, and panic among investors is spreading. Nevertheless, some analysts believe this may indicate that the market is nearing a bottoming out phase, potentially leading to a rebound opportunity in the future.

3. Project Highlights

1. Telegram founder launches decentralized AI computing network Cocoon

Telegram founder Pavel Durov announced the launch of a decentralized AI computing network called Cocoon. The network is built on the TON blockchain and the Telegram ecosystem, aimed at addressing the high costs and privacy issues posed by traditional AI computing providers such as Amazon and Microsoft.

Cocoon allows users to submit AI requests over the network, which are processed by GPU providers in exchange for TON token rewards. Users' requests will be 100% privacy protected, without worrying about data leaks. Durov stated that Cocoon will expand GPU supply and introduce more developer demand in the coming weeks.

The launch of this network marks another significant advancement for Telegram in the fields of Web and AI. As a decentralized computing platform, Cocoon is expected to provide users with more cost-effective and privacy-friendly AI services. Its open-source and permissionless characteristics will also promote the democratization of AI computing capabilities.

Industry insiders have welcomed Cocoon, believing it helps break the monopoly of large tech companies on AI computing resources. However, some analysts are concerned that the level of decentralization of the network and its privacy protection capabilities still need further verification. Overall, Cocoon represents a new trend in the integration of Web and AI, and its success or failure will have a profound impact on the industry.

2. Yearn was attacked for 9 million dollars, hackers exploited a vulnerability to mint unlimited yETH tokens.

The leading DeFi protocol Yearn has suffered a major attack, with losses reaching up to 9 million dollars. The attacker exploited a vulnerability in the yETH contract to mint an unlimited supply of yETH tokens and drained the funds from the liquidity pool.

The Yearn team has paused the relevant contracts and is investigating the specific cause of the incident. It is understood that the vulnerability exists in an older version of the yETH contract, allowing attackers to bypass minting restrictions.

This incident has once again raised people's concerns about the security of DeFi. Although Yearn is one of the largest and most mature protocols in the industry, it still cannot completely avoid the risks of code vulnerabilities and hacker attacks.

Some analysts believe that this attack will accelerate the adoption of stricter security audits and defensive measures in the DeFi industry. At the same time, there are calls for DeFi protocols to focus more on simplicity and auditability, avoiding overly complex designs.

Overall, the attack that Yearn encountered once again highlights the importance of blockchain security. The DeFi ecosystem needs to learn from this incident and strengthen risk management in order to gain the trust of more users.

3. Sui Ecosystem Development Updates: Grayscale Trust and Native USDC Launch

The Sui ecosystem has recently made significant progress, with Grayscale Trust and Native USDC launched one after another, injecting new vitality into the ecosystem.

Grayscale Trust is the first digital asset trust product launched on Sui, allowing institutional investors to participate in the Sui ecosystem. Its launch marks the official entry of traditional financial institutions into Sui, which is expected to bring more funds and users to the ecosystem.

At the same time, Native USDC on Sui has officially launched. As a stablecoin pegged to the US dollar, USDC will provide value anchoring and liquidity support for the Sui ecosystem, promoting the development of applications such as DeFi and payments.

The Sui ecosystem is currently developing rapidly and has attracted a number of star projects such as Cetus and Navi. However, at the same time, the lack of investable varieties has also become a bottleneck restricting its development.

Analysts believe that the launch of Grayscale Trust and USDC will help the Sui ecosystem build a more complete infrastructure, laying the foundation for future development. However, for Sui to truly break through, it still needs more killer applications to emerge.

Overall, the Sui ecosystem is progressing steadily, and its future development is worth the continuous attention of industry insiders.

4. Observations from the Token2049 Conference: Industry Divergence Intensifies, Innovation Coexists with Confusion

At the recently concluded Token2049 conference, the intensified industry differentiation and the coexistence of innovation and confusion are thought-provoking.

On one hand, leading ecosystems like Solana, Base, TON, and BTCFi continue to make strides, with innovative projects and breakout applications emerging, leading the development of the industry. Entrepreneurs within these ecosystems are full of confidence and optimistic about the future.

On the other hand, traditional popular sectors such as blockchain gaming, NFTs, and Web3 social are struggling and experiencing slow development. Practitioners feel confused about the prospects, and some have even started to shift to the Meme sector.

Analysts point out that this differentiation reflects significant adjustments in the industry. Past popular tracks have been discredited, while new tracks such as AI+Web3 and Computing are beginning to emerge. However, truly killer applications are still being explored.

At the same time, some new development trends have emerged in the industry, such as more traditional AI companies starting to venture into the Web3 space. This integration may give rise to new innovative opportunities.

Overall, the Token2049 conference showcased the vibrant yet challenging state of the current cryptocurrency industry. The industry is undergoing a period of pain, accompanied by both innovation and confusion. However, as long as we persevere, we will surely welcome a new dawn.

4. Economic Dynamics

1. Artificial intelligence solely supports GDP growth, with the market dominated by emotions and capital flow.

The current economic situation shows that artificial intelligence has become the sole engine driving GDP growth. According to the latest data, GDP grew by 3.2% year-on-year, mainly due to the contributions of AI-related industries. However, other traditional sectors such as manufacturing and services have experienced varying degrees of decline, the job market remains weak, and inflation rates continue to rise.

Recently, the United States announced the relaxation of export controls on artificial intelligence chips, which is expected to further promote the development of this field. At the same time, the European Union has also accelerated the process of establishing a regulatory framework for artificial intelligence, aiming to create a favorable policy environment. These policy changes are expected to bring new development opportunities to the artificial intelligence industry.

However, market dynamics seem to have detached from economic fundamentals, primarily driven by investor sentiment and capital flows. Analysts point out that a wave of liquidity may emerge in 2026, at which time the market will face significant changes. In addition, the widening wealth gap has also become an important factor hindering economic development, as young people are beginning to view cryptocurrencies as a new investment option.

Experts believe that energy supply shortages may become a major bottleneck for the development of artificial intelligence. In the future, the economy will further differentiate into a capital-driven artificial intelligence industry and traditional labor-intensive industries. Governments and enterprises need to take strong measures to address this new economic landscape.

2. Federal Reserve officials signal dovish stance, but inflation pressures remain.

Federal Reserve officials recently spoke, releasing some dovish signals, suggesting a possible slowdown in interest rate hikes. However, the pressures of high inflation and a weak labor market still exist, making it a difficult choice for the Federal Reserve.

Specifically, Federal Reserve Governor Bowman stated that if inflation continues to decline and eventually returns to the 2% target, the Federal Reserve may pause interest rate hikes at an appropriate time. Meanwhile, Federal Reserve Chairman Powell also emphasized that policy decisions will be adjusted based on changes in data. These remarks are seen as a signal that the Federal Reserve is beginning to shift towards a dovish stance.

However, the latest data shows that the number of jobs in the United States increased by only 127,000 in November, lower than expected, reflecting a weak job market. At the same time, the annual rate of the core PCE price index is 5.1%, far above the 2% target, indicating that inflationary pressures remain significant.

The market has reacted differently. Some investors believe that the Federal Reserve may pause interest rate hikes in the first half of next year, thereby supporting risk assets. However, some analysts warn that if inflation does not show significant cooling, the Federal Reserve may be forced to continue raising interest rates, leading to an economic recession.

Goldman Sachs analysts indicate that the challenge facing the Federal Reserve is to curb inflation while avoiding a collapse in the labor market. They expect that the Federal Reserve will ultimately opt for gradual rate hikes until there is a clear downward trend in inflation data. Overall, there remains considerable uncertainty regarding the Federal Reserve's policy direction.

3. The Bank of Japan tightens monetary policy, causing turbulence in global markets.

The Governor of the Bank of Japan, Kazuo Ueda, recently made hawkish remarks, stating that if economic activity and prices meet expectations, the Bank of Japan will continue to raise policy interest rates based on the improvement of the economy and prices. This statement has caused significant fluctuations in global financial markets.

Specifically, Japan's 10-year government bond yield has surpassed 1% for the first time since 2008, and the 2-year government bond yield has also reached a 15-year high. The yen has significantly strengthened against the US dollar, and the Asia-Pacific stock markets have fallen in response. This reflects the rising expectations among investors for the Bank of Japan to accelerate its monetary policy tightening.

Analysts point out that if Japan truly ends its years-long ultra-loose monetary policy, it will have a profound impact on the global financial landscape. On one hand, it may attract capital outflows from major economies like the United States, exacerbating global liquidity tightening; on the other hand, it may prompt other major central banks to accelerate interest rate hikes to avoid excessive depreciation of their own currencies.

However, some experts believe that the Bank of Japan's remarks this time may be temporary, and a real policy shift requires more economic data support. Although Japan's inflation rate has rebounded somewhat, it still remains far lower than that of other developed economies, limiting the motivation for interest rate hikes.

Overall, the policy direction of the Bank of Japan will directly influence the trends in global financial markets. If Japan really begins to tighten its monetary policy, it is expected to trigger a new round of asset price re-evaluation, and central banks in various countries may also be forced to follow suit. Market participants need to closely monitor subsequent policy signals.

5. Regulation & Policy

1. Chinese regulators join forces to reiterate the ban on speculative trading of virtual currencies.

On November 28, the People's Bank of China held a meeting with the Ministry of Public Security, the Cyberspace Administration of China, and 13 other departments to reiterate the relevant provisions in the “Notice on Further Preventing and Dealing with Risks of Virtual Currency Trading Speculation” issued in 2021. This meeting marks a further upgrade of China's regulation on virtual currencies.

The conference pointed out that virtual currencies do not have the same legal status and legal tender as fiat currencies, and related business activities belong to illegal financial activities. It specifically mentioned the risks associated with stablecoins being used for money laundering, fundraising fraud, and illegal cross-border fund transfers. The conference required all units to continue adhering to the prohibitive policy on virtual currencies and to persistently combat relevant illegal criminal activities.

The lineup of this conference is impressive. Compared to the notice in 2021, new departments such as the Central Financial Office, the National Financial Supervisory Administration, and the Ministry of Justice have been added, reflecting an upgrade in regulatory scope and strategy. Analysis indicates that this will promote the transition of regulation from inter-departmental collaboration to a higher level of cross-domain coordination, forming a synergy of policies and resources; at the same time, it will enhance the precise identification and investigation of illegal financial activities, providing stronger legal support for regulation.

Industry insiders believe that clearly defining stablecoins as a form of virtual currency provides a logical premise for their subsequent inclusion in financial regulatory systems such as anti-money laundering and cross-border capital flows. Lawyer Xiao Sa interprets that the focus this time is on regulating the use of stablecoins for illegal currency exchange, which severely disrupts the financial order.

2. Japan plans to implement a single 20% tax rate on cryptocurrency trading income.

The Japanese government and the ruling party are working to adjust the taxation policy on income from cryptocurrency trading, planning to uniformly impose a 20% income tax rate regardless of the transaction amount, so that it enjoys the same treatment as other financial products such as stocks and investment trusts.

Currently, Japan adopts a comprehensive tax system for cryptocurrency trading income, which means that it is combined with other types of income and taxed according to a progressive tax rate based on the total income amount, with a maximum rate of 55%. The new policy will implement a separate taxation method, taxing cryptocurrency trading income independently.

The government's goal is to incorporate this adjustment into the 2026 tax reform outline, which is expected to be finalized by the end of the year. This move aims to reduce the tax burden on investors and invigorate the domestic cryptocurrency trading market.

At the same time, the Financial Services Agency of Japan plans to submit an amendment to the Financial Instruments and Exchange Act to the Diet at the regular session in 2026 to strengthen regulation of cryptocurrency trading. The amendment will explicitly prohibit insider trading using undisclosed information and require cryptocurrency issuers to fulfill information disclosure obligations.

With the advancement of tax reform, it is expected that Japan will also lift the ban on investment trust products that include cryptocurrency components. This move will provide institutional investors with more investment channels and is expected to further promote the development of the cryptocurrency market.

3. South Korea plans to establish a “Korean-style stablecoin” alliance model through the “Basic Act on Digital Assets” next January.

The ruling party and the opposition party in South Korea have reached a breakthrough agreement on the regulatory framework for stablecoins, planning to pass a complete “Digital Asset Basic Law” by January 2026. The bill establishes a “Korean-style stablecoin” alliance structure, requiring banks to hold at least 51% of the equity, while technology companies can participate as minority shareholders.

According to the agreement, Democratic Party member Kang Jun-hyeon has set December 10 as the deadline for the government proposal. If the financial authorities fail to submit on time, the member will introduce an independent version. This reflects the South Korean government's high emphasis on stablecoin regulation.

The bill aims to regulate the issuance and circulation of stablecoins to prevent financial risks. The bank-led alliance model is expected to enhance the trust in stablecoins, while the participation of technology companies will also drive innovation. However, specific details will remain to be clarified after the bill is passed.

Experts say that South Korea's move is aimed at gaining a favorable position in the global regulatory race. Stablecoins are seen as a key link between cryptocurrencies and traditional financial systems, and establishing a clear regulatory framework will help attract relevant companies to settle in South Korea.

Overall, the “Basic Law on Digital Assets” will provide institutional guarantees for the development of South Korea's cryptocurrency industry and is expected to promote the long-term healthy development of the industry.