Draft Resolution 1.

Conference: Meluha Model United Nations 2023

Committee: Group of Twenty

Date: The 24th of September, 2023

Sponsors: Republic of Indonesia, Federative Republic of Brazil

Signatories: United Mexican States, Republic of South Africa, Republic of India, Japan,
Republic of Turkey, African Union, People’s Republic of China, Republic of the Sudan, Republic
of Korea, Hungary, United Nations, Organization for Economic Cooperation and Development,
Russian Federation, International Monetary Fund, Republic of Italy, United Nations Educational,
Scientific and Cultural Organization, Word Intellectual Property Organisation, World Bank

• Realizing the potential that Artificial Intelligence and crypto-assets hold for
supplementing the development of States from nearly all socio-economic backgrounds,

• Recognizing the several advantages of Artificial Intelligence and crypto-assets for

development in general and economic development in particular,

• Believing Confident that Artificial Intelligence and crypto-assets can be exploited to

supplement the achievement of the United Nations Sustainable Development Goals,

• Noting further the disadvantages and dangers posed by crypto-assets and Artificial
Intelligence to States individually and to the world jointly,

• Deeply conscious of the implications on privacy of users of Artificial Intelligence and

crypto-assets,

• Fully Aware of the impact that innovation in Artificial Intelligence may have on
employment levels in States, which are both positive and negative,

• Bearing in mind the level of development of Digital Public Infrastructure, crypto-asset

markets, cybersecurity provisions, and integration of Artificial Intelligence with
economies, financial institutions and miscellaneous entities,
• Guided by already-established frameworks, legislations and regulations of other States,
those produced by the OECD and the adopted G20 AI Principles,

• Reaffirming the importance of global cooperation and mutual assistance to promote

worldwide development,

1. Encourages the development of and investments in the sectors of Artificial Intelligence

and crypto-assets at a pace most suitable to the social, economic and political conditions
of the regions:
(i) Expressing its hope for a gradual and controlled pace of development to
prepare for its implication on economies and societies;

2. Endorses the creation of a globally accepted framework for the regulation of Artificial
Intelligence and crypto-assets:
(i) Emphasizes the need to ensure security, transparency, responsibility,
accountability and cooperation among the States,
(ii) Recognizes the requirement to unambiguously define terms and phrases
associated with the regulation,
(iii) Affirms the need to penalize non-compliance with regulations and criminal
activity,
(iv) Expressing its hope for the creation of a uniform framework to be adopted by
the States,
a) Realizes that uniform implementation in all countries may be
unfeasible, but aims to achieve this to the most practical extent,
b) Invites States to suggest relevant amendments and provide inputs
which shall be thoroughly examined and incorporated if need be;

3. Adopts the Unified Approach for Responsible AI and Crypto-Asset Regulation

(UARACAR) as of 24th of September, 2023:
(i) Designates People’s Republic of China to host the conference on the 10th and
11th of October, 2024 in Beijing,
a) Notes the significance of the dates of conference, the 10th and 11th of
October, 2024 due to the Chinese mid-autumn festival occurring then,
b) Notes the significance of the location of the conference, Beijing, due to it
being the capital city of the People’s Republic of China and an important
center of cultural heritage;

4. Recommends implementation of required measures to control effect of implementation of

Artificial Intelligence on employment levels in States:
(i) Considers the potential of Artificial Intelligence in displacing jobs in various
sectors at various skill levels,
 a) Notes the impact of job displacement on social, economic and cultural
spheres;
(ii) Invites investment to design schemes that will help workers transition to new
jobs in emerging industries like Artificial Intelligence and Automation,
a) Suggests schemes for skill-building and creating awareness among the
citizens,
b) Suggests schemes for providing some unemployment benefits for
providing a safety net to citizens during economic disruptions caused by
Artificial Intelligence,
c) Suggests implementation of courses regarding Artificial Intelligence in
educational institutions to upskill future generations,
(iii) Calls upon businesses and employing agencies to take steps toward employee
development and retention in return for certain government incentives;

5. Urges the creation of a statutory body to maintain registries of all legally traded
cryptocurrencies to aid in the regulation of crypto-assets;

6. Deplores the committee to provide for a universal standard of transparency and

accountability, to ensure even cross-border transactions may be regulated to abide by
relevant laws:

(i) Invites international bodies such as United Nations and Organization for
Economic Cooperation and Development to aid in regulation regarding this;

7. Endorses the use of Artificial Intelligence for developing cybersecurity, national security,
defensive and anti-terrorism measures in order to enhance public safety:

(i) Deplores the use of Artificial Intelligence for committing unsanctioned

violence against other States;
8. Invites States and Multi-lateral Organizations to contribute resources and information to
facilitate the development and innovation of Artificial Intelligence and crypto-asset
industries and to aid Low-Development Countries in this matter.

ANNEX

Contributors:
United Nations

Unified Approach for Responsible AI and Crypto-Asset Regulation (UARACAR):

EXECUTIVE SUMMARY-
Project overview-
1. The Unified Approach for Responsible AI and Crypto Asset Regulation
(UARACAR) is a joint project led by the member countries of G20 with aid from
the multilateral organisations.This project aims to solve developing difficulties at
 the interface of artificial intelligence (AI) and cryptocurrency regulation, laying the
framework for a unified and ethical financial sector strategy.

Objectives-
2. The following are the key goals of the UARACAR initiative:

a. Develop a comprehensive and adaptive regulatory framework to

harmonise AI and cryptocurrency rules across participating nations and
areas.

b. To minimise algorithmic bias and assure ethical AI practises in the financial

industry, emphasise responsible AI use, transparency, and accountability.

c. Improve Investor Protection: Create norms and regulations to protect

investors' interests in the bitcoin industry, while also fostering
transparency and fair market practises.

d. Facilitate Cross-Border collaboration: Encourage international

collaboration among member countries and intergovernmental
organisations to have a standard regulatory fragmentation, that is
adaptable according the the country's position.

e. Allocating funds and resources including intellectual property towards

research and development in the fields of AI and blockchain technology to
drive innovation (focusing on MSMEs)

Key Milestones-
3. The UARACAR project will go through critical milestones, with the following
expected timeline:

a. Project Launch (Months 1-2):

I. Formation of a Project Team
II. Project First Meeting
b. Months 3-6: Research and Analysis
I.Extensive study on artificial intelligence and cryptocurrency regulations
II.Participation and consultation with stakeholders
c. Framework Creation (Months 7-12)
I.The unified regulatory framework was created collaboratively.
 II.Sessions for framework review and feedback
d. Pilot Projects (March 13-18)
I.Pilot programmes will be implemented to assess the framework's efficacy.
II.Data gathering and analysis
e. Coordination Across Borders (Months 19-24)
I.Creating international collaboration mechanisms
II.Harmonisation of regulations and standards
f. monitoring and evaluation(ongoing)
I.AI and cryptocurrency advances are constantly being tracked.
II.Periodic assessments and framework refinements

4. Budget Summary
a. Total Project Budget: $70 million
b. Contributions by More Economically Developed Countries(MEDCs):

I.European Union: $10 million

II.China :$10 million
III.Japan: $1.5 million
IV.Germany: $6 million
V.France: $5 million
VI.Canada: $4 million
VII.India: $2 million
VIII.Russia: $1 million
IX.Australia: $3 million
X.Brazil: $3 million
XI.South Africa: $2 million
XII.Mexico: $2 million
XIII.Republic of Korea: $1.5 million
XIV.Türkiye: $1 million
XV.Indonesia: $1 million”
XVI.Hungary: $3 million
XVII.African Union: $3 million

e. Contributions by International Organizations:

I.International Monetary Fund (IMF): $4 million
II.World Bank: $5 million

f. Additional Funding Sources:

I.Private Sector Partnerships: $2 million (anticipated contributions from tech companies,
financial institutions, and relevant stakeholders)
 5. Analysing costs by breakdown:
a. Research and Analysis: $20 million
i.Extensive research on AI and cryptocurrency regulations
ii.Stakeholder engagement and consultation
b. Framework Development: $10 million
i. Collaborative drafting of the unified regulatory framework
ii. Framework review and feedback sessions
c. Pilot Programs: $18 million
i. Implementation of pilot programs to test the framework's effectiveness
ii. Data collection and analysis
d. Cross-Border Coordination: $5 million
i. Establishment of international cooperation mechanisms
ii. Harmonisation of standards and regulations
e. Monitoring and Evaluation: $5 million (Ongoing)
i. Continuous monitoring of AI and cryptocurrency developments
ii. Periodic evaluations and framework refinements
f. Capacity Building in Less Economically Developed Countries: $7 million
i. Training and support for regulatory agencies in less economically developed
countries to implement the framework effectively.
g. Contingency Fund: $5 million
i. Reserve fund for unforeseen expenses or emergencies during project
implementation.
h. Total Budget: $70 million

* This budget summary reflects a collaborative effort among economically developed and less
economically developed countries, international organisations, and the private sector to address the
challenges posed by AI and cryptocurrencies in the financial sector. The contributions from
economically developed countries aim to support capacity building and participation from less
economically developed nations to ensure the project's success.

INTRODUCTION -
*In response to the evolving landscape of finance, the Global Crypto Asset And AI Risk
Assessment Council (GCAARAC) emerges as a decisive response to the pressing need for
comprehensive regulation of crypto assets and the promotion of responsible AI utilisation. In
the face of rapidly advancing technologies, our mission is to ensure the integrity and security
of financial systems globally. GCAARAC represents a formal and direct commitment to
addressing these challenges head-on and forging a path toward a stable and responsible
financial future.

Background and Context

The combination of artificial intelligence (AI) and cryptocurrencies in today's financial world
brings enormous prospects, but also fundamental concerns. AI offers efficiency and
personalised services, but it also requires ethical monitoring to avoid prejudice. Although
cryptocurrency transactions are borderless, they require regulation to safeguard investors and
preserve market integrity. This convergence necessitates a coherent strategy that harmonises
AI and cryptocurrency laws, respects ethical values, and ensures global financial stability.

Objective of the Document

The purpose of this document is to outline the project planning framework for the initiative
Unified Approach for Responsible AI and Crypto Asset Regulation (UARACAR). It acts as a
complete reference to the project's objectives, strategies, and implementation, providing
project stakeholders with a clear path.

The purpose of this text is to:

Document Objectives: Clearly outline the UARACAR initiative's goals and objectives,
emphasising the significance of harmonising AI and cryptocurrency regulation and fostering
ethical practises.

Establish a Framework: Establishing the framework for the project, including major
milestones, stakeholder responsibilities, financial considerations, and risk management
techniques.

Define Scope: Determining the project's scope, including participating nations and
organisations, initial implementation phases, and areas of focus such as regulatory
harmonisation and ethical considerations of AI.

Scope:
-Participating Entities: The initiative involves collaboration between established and
developing nations, international organisations, and business sector partners committed to
tackling the issues of AI and cryptocurrency legislation.
-The fundamental goal is to harmonise regulatory frameworks, encourage responsible AI
practises, strengthen investor protection, and allow cross-border collaboration in the context
of bitcoin assets.
-Phased Implementation: The project will be carried out in stages, beginning with pilot
programmes and progressively extending to include a larger range of participants.
-financial Allocation: A complete financial plan will be prepared to fund research, framework
development, pilot projects, and international coordination activities, taking into account the
contributions of participating entities.

Limitations:
- Constraints on Resources: The success of the project is dependent on the availability of
financial and human resources given by participating entities. The scope and pace of
implementation may be influenced by resource constraints.
- AI and cryptocurrency complexity: The fast developing nature of AI and cryptocurrency
technology poses continual hurdles. Emerging changes that necessitate ongoing adaptation
may have an impact on the project's impact.
- Worldwide Adoption: Achieving worldwide consensus on regulatory standards can be a
protracted process, and not all nations will embrace the unified framework right away.
External events, such as geopolitical movements and changes in the global financial
environment, might have an impact on the project's outcomes.

PROJECT VISION AND OBJECTIVES-

*Vision
To develop a worldwide collaborative environment in which the ethical use of artificial
intelligence (AI) and the regulation of cryptocurrency assets effortlessly intersect. Our
objective is to develop a comprehensive framework that harmonises AI and crypto asset
legislation, assuring transparency, accountability, and investor protection, and fostering
ethical innovation and global financial stability in the process.

Project Objectives
The following are the key goals of the UARACAR (Unified Approach for Responsible AI and
Crypto Asset Regulation) project:
-Align Regulatory Frameworks: Create a comprehensive and adaptive regulatory
framework that aligns AI and cryptocurrency rules across participating countries and regions.
-Prioritise Ethical AI: To minimise algorithmic bias and promote ethical AI practises in
the financial industry, emphasise responsible AI use, transparency, and accountability.
-Improve Investor Protection: Create norms and standards to protect investors'
interests in the bitcoin industry, while also fostering transparency and fair market practises.
-Encourage Cross-Border collaboration: Encourage international collaboration among
member countries and intergovernmental organisations to avoid regulatory fragmentation
and establish uniform standards.

Key Performance Indicators (KPIs) for the project

*-On a scale of 1 to 100, the Regulatory Harmonisation Index measures the degree of
harmonisation achieved in AI and cryptocurrency legislation among participating nations.
-Algorithmic Bias decrease: Assess the decrease in algorithmic bias within AI systems
employed in the financial sector, with a percentage reduction as a goal.
-Investor Confidence Index: Surveys and marcrossket sentiment analysis are used to
assess investor confidence in the bitcoin market, with a target benchmark for improved
confidence.
-Cross-Border Collaboration Score: Evaluate the number of collaborative agreements
and methods formed to assess the efficacy of international collaboration.
-Framework Implementation Efficiency: Assess the efficiency with which the
regulatory framework is being implemented in each participating country, documenting
progress and compliance rates.
- Ethical AI Compliance: Examine AI systems' adherence to ethical norms, including
transparency, accountability, and transparency.

Project Scope
Project scope statement
 The UARACAR project intends to provide a comprehensive and unified regulatory framework
that covers the responsible use of AI and the regulation of crypto assets. This initiative aims to
develop standardised standards, policies, and regulatory processes through collaboration
among member nations, multilateral organisations, and business sector firms.

Project Goals
The UARACAR project aims to provide a uniform regulatory framework, policy guidelines, and
collaboration mechanisms. It does not entail the direct implementation or enforcement of
rules inside member nations, which is left to the relevant national authorities.

Constraints
Financial Restriction: The project's budget is subject to allocation and approval by member
nations and organisations.
Regulatory Variability: varied member nations may have varied current regulatory
frameworks, necessitating efforts for alignment and harmonisation.
AI systems and crypto assets comprise a wide range of technology and applications, making
standardisation a difficult undertaking.

Assumptions
The project anticipates that member nations and organisations will work together to design
and implement a uniform regulatory framework. It also expects that project activities will be
supported by resources such as finance and expertise.

Project Approval:
This Project Scope Statement is subject to approval by the project's governing body,
consisting of representatives from member countries and organisations. Any changes to the
project scope will require formal approval through the defined change control process.

Project Manager: [Name] [Title] [Contact Information]

Date of Approval: [Date]

(Will be decided in the next meeting)

Project schedule will be decided in the next meeting

6. ETHICAL AI
a. The data sets used by the AI must be inclusive.

i.For AI that is used to analyse trends and draw conclusions - the

demographics of the data the AI is analysing must be statistically equal to
the demographics of the geographical area where the AI will be operating.
ii.The data sets must be subject to regular updating, with a minimum requirement of
yearly updation, and a preferred bi-annual updation
b. The AI must not be used for purposes that are not constitutionally illegitimate for
the given country:

i.The AI must not be used for purposes of subversion, impersonation of

another individual.
ii.The AI must not be used for purposes of fraud(actively hiding information
from the receiving party with the intent to solicit extra information, money,
or perform other activities that may harm the individual)
iii.The AI must not be used for Impersonation scams

c. The data-privacy laws of the country are applicable to AI systems

i.The AI model must abide by the principle of data minimisation(the AI must

collect only as much data as is absolutely necessary),
ii.The AI must not process the individual’s data unless for purposes of
research analytics by a public organisation, or in the case where
unambiguous consent is given by the user
iii.AI must not collect the data of any legal minors, unless unambiguous
parental consent is given.
iv.Users must always have the option to not have any of their data collected
while using the service

d. The AI’s systems and decision-making must be explainable in a court of law.

i.AI is not permitted to make independent decisions in the case where it

may cause potential harm to an individual, that is in the fields of
healthcare, financial investment, legal advice.
ii.In the scenario where generative AI has violated a patent or used an
individual’s work for commercial purposes, intellectual property laws
apply.

e. The user is made aware of the AI, and must be given the option to not use it.

f. Protecting intellectual property

 i. An individual’s unique intellectual property cannot be used to train AI
models unless unambiguous consent is obtained from the individual
ii.Generative AI cannot make use of an individual intellectual property for
commercial purposes

7. CROSS BORDER TRANSACTIONAL SAFETY FOR CRYPTO-CURRENCIES

a. The need for transparency:

• The provider must have records of the transmit originator and beneficiary
information in order so that the transaction can be reviewed easily at a
later date
• For transfers over $500 000, there must be complete transparency as to
the identity of the sender and receiver, and the purpose of the transaction
in order to prevent terrorism financing.
b. Anti-terrorism financing:
• The provider must carry out thorough risk identification measures, and
must have a Risk Mitigation Officer overseeing the measures in order to
prevent hacks, etc. from disrupting the transaction and leading to cross-
border issues.
• The Virtual Asset Provider must monitor the regularity of transactions and
alert government officials when transactions are exceedingly regular(the
decision will be taken by the Risk Mitigation Officer)

* Involved Bodies: FATF, WTO, VACG

8. INNOVATION AND RESEARCH

a. Plans to include AI-engineering and crypto-asset management

courses at public universities at a post-graduate level by 2027
b. Public awareness projects that include the dissemination of
information on AI may serve to increase public understanding of this
technology's potential advantages and disadvantages.
c. Support to Small and Medium Enterprises(firms employing 10 to
250 people)
• Plans to offer technological assistance to tertiary-sector SMEs and
start-ups so that they integrate AI into their systems, increasing
their productivity and competitiveness
• Developed countries must create programs to offer grants/seed-
funding/low-interest loans to SMEs and start-ups that engage in AI
innovation by 2025

10. INVESTOR PROTECTION IN CRYPTO-CURRENCY

 a. There must be complete transparency given to the investor as to which asset
stable-coins are based upon.
b. Crypto-custody licences must be offered to crypto-asset
management companies, and only licenced companies will be permitted to
engage in crypto-asset management activities.
c. Regulations around crypto-asset allocation in funds:
• Special funds cannot allocate more than 40% of their assets in
crypto-assets until 2027
• Mutual funds cannot allocate more than 15% of their assets to
crypto-assets until 2027, and not more than 5% of their assets to
unbacked crypto-assets until 2027.

11. Regulatory Guidelines

a. The World Bank will monitor the ICOs as it has less transparency. With the
Monitoring of ICOs these will be the promising results:
i.Internal Guidelines
-The World Bank will promote transparency within the ICO space.This will
help the ICO projects to provide more detailed information about their
upcoming projects,aim,use of funds and investments.
- Regulatory Compliance: With the involvement of the World
bank,encouragement in the IPOs to comply with the existing financial
regulations in various countries will act as a confident act on the investors.
-The IMF will also like to look in the matter of ICO advisors as many
advisors do not take enough care about the project which increases the
possibility of failure.

12. Stakeholder Analysis-

a. Identification of Stakeholders
i.COUNTRIES-
• The members of this policy are Argentina, Australia, Brazil, Canada,
China, France, Germany, India, Indonesia, Italy, Japan, Republic of
Korea, Mexico, Russia, South Africa, Saudi Arabia, Türkiye, the
United Kingdom, the United States, the African Union and the
European Union.
ii. INTERGOVERNMENTAL ORGANISATIONS-
• United Nations, World Bank, International Monetary fund,
Organisation for Economic Cooperation and Development,World
Intellectual Property Organization,UNESCO and the financial action
task force.

*Private sector entities and Regulatory Bodies will be discussed

b. Stakeholder responsibility
c. Communication plan
• i. Meetings and Workshops:
• Regular Stakeholder Meetings: Scheduled meetings with representatives
from member countries, intergovernmental organizations, and private
sector entities to discuss project progress, challenges, and updates.
• Working Groups: Establish specialised working groups focused on specific
project aspects, such as technical standards or policy development, to
facilitate in-depth discussions.
• Capacity-building Workshops: Conduct workshops and training sessions to
enhance the understanding of project objectives and regulatory
requirements.
• ii. Reports and Documentation:
• Progress Reports: Regularly published reports detailing project milestones,
accomplishments, and challenges. These reports will be shared with all
stakeholders to maintain transparency.
• Policy Documents: Share draft policies, regulations, and guidelines for
feedback and input from member countries, organizations, and the private
sector.
• iii. Digital Platforms:
• Project Website: Create a dedicated project website providing access to
project documentation, reports, updates, and contact information.
• Email Communication: Utilize email newsletters and updates to reach
stakeholders with important announcements and developments.
• iv. Social Media:
• Social Media Channels: Establish and maintain official project profiles on
relevant social media platforms to share updates and engage with a wider
audience.
 • v. Webinars and Online Conferences:
• Virtual Events: Host webinars and online conferences to discuss project-
related topics, present findings, and encourage participation from
stakeholders across the globe.
• vi. Direct Communication:
• Designated Contacts: Appoint dedicated contact persons or liaison officers
within member countries and organizations for direct communication and
addressing specific queries.
• Feedback Mechanisms: Establish channels for stakeholders to provide
feedback, suggestions, and concerns.
• vii. Traditional Media:
• Press Releases: Issue press releases to traditional media outlets to ensure
wider public awareness and understanding of project objectives.
• viii. Surveys and Questionnaires:
• Feedback Surveys: Periodically distribute surveys and questionnaires to
gather input and opinions from stakeholders on project progress and
effectiveness.
• ix. Collaborative Online Platforms:
• Collaboration Tools: Use online collaboration platforms and tools for real-
time discussions, document sharing, and collaborative work among project
participants.
• x. Interactions at International Events:
• Participation in International Events: Attend international conferences,
summits, and events related to AI and crypto assets to engage with
stakeholders on a global scale.

13. Resource Allocation

a. Human Resources
i.Project Manager: In charge of overall project coordination, stakeholder communication,
and project implementation.
ii.Legal Experts: Lawyers that specialise in international regulatory frameworks, artificial
intelligence legislation, and crypto asset regulation.
iii.AI Experts: AI experts who understand ethical AI concepts, responsible AI development,
and upcoming AI technology.
iv.Financial Experts: Financial services and cryptocurrency industry experts to help with
crypto asset regulation.
v.Regulatory Analysts are experts in regulatory analysis and compliance.
vi.Policy Advisors: Consultants that advise on policy creation and harmonisation initiatives.
vii.Technical Specialists: IT and technology specialists who will help with the formulation of
AI policy.
viii.Communication Specialists: Stakeholder involvement and project information
distribution will be managed by communication and public relations specialists.
*Trainers who undertake capacity-building programmes are known as capacity-building
trainers.
*Budget allocation will be decided in the next meeting
 b. Equipment materials
i.Laptops, software tools, and data analysis platforms for research and development are
examples of computers and software.
ii.Training Materials: Programme materials such as training manuals, presentation
materials, and educational tools.
iii.Communication and collaboration tools to help with stakeholder involvement and
project management.
iv.Rental of conference facilities, equipment, and materials for project-related conferences
and workshops.

*will be discussed late

14. Risk Management

a. Risk Identification:
Risk identification can be carried out in 3 steps:
i.Identify all relevant assets
• Prioritize those assets that have relevance to confidentiality,
integrity and availability of data of the organization.
ii. Identify vulnerabilities to those assets
• These involve any weaknesses in cybersecurity systems that leave
data and systems open to cyberattacks.
iii. Identify potential threats to those assets
• Threats may come from different sources including by ransomware,
malware, hacking and even environmental or supply-chain factors.

b. Risk Assessment and Prioritization

Refers to cyber risk entity or organization may face without any mitigating control in
place
i. Risk to be assessed on 4 factors:
• Technology
• Bank Products
• Organizational characteristics
• Cyber Incident track record
ii. Risk assessment data must be submitted to regulating authority or other
relevant governing body.
iii. Regulating/governing body to evaluate all assessment reports and issue
quantifiable level of risk prioritization based on set criteria or rubric. Rubric to be decided
in committee session at a later date.
 c. Risk Mitigation Strategies
Once identified risks have been analysed and evaluated, risk control measures to be
implemented.
i. Risk mitigation measures may include:
• Avoidance (Withholding/avoiding the activity/operation that may cause
the risk)
• Transference (Transfering risk to third party, for example- insurance)
• Buffering (Incorporating additional resources to mitigate potential risk
impact)
• Strategizing (Creating contingencies for risks)
• Testing (Simulating situations/challenges to understand and mitigate risks)
• Reduction (Implementation of risk controls)

15. Quality Assurance

a. Quality Standards
i.Some principles and standards need to be abided by to ensure regulatory integrity and
efficiency. These are as follows.
• Adopt broad programmes of regulatory reform to establish clear objectives and
frameworks for implementation at the political executive level.
• Systematically assess impacts and review regulations to ensure that they meet
their intended objectives efficiently and effectively in today’s ever changing
economic and social conditions.
• Ensure that regulations, regulatory institutions and regulatory processes are
transparent and non-discriminatory. They must abide by the existing social and
democratic values.
• Review and strengthen the scope, effectiveness and enforcement of policies as
and when required.
• Economic regulations should work to stimulate competition and efficiency, and
eliminate them in environments where they do not work to serve the public
interests.
• Eliminate unnecessary regulatory barriers to trade and investment and enhance
market openness throughout the regulatory process, so as to strengthen
economic efficiency and competitiveness.
• Identify important links with other policy objectives and develop policies to
achieve those objectives to supplement reform.

b. Quality Control and Implementation

i.Regulatory compliance is necessary to ensure operational integrity and efficiency.
Recognizing this, the following implementation measures are suggested.
• Regulatory authorities and other implementation bodies must be
strict and vigorous in their operations.
 • Documentation should fully adhere to the formatting, guidelines,
submission deadlines and other requirements issued by the
authorities.
• Self governing authorities to internally implement policies and
ensure abidance.
• Certain renumerations to be granted for proper implementation and
quality control.
• Some penalties to be applied for non-abidance.

c. Quality Assurance metrics

i.A quantifiable score is to be granted for regulations, frameworks and policies to measure
their efficiency and applicability. On a board view, this score can be granted on the
following criteria.
• Acceptability (Consensus of parties/nations involved to abide by the
regulations)
• Exhaustibility (Scope and extent of items covered under the
regulations)
• Relevance (Regulations’ ability to address problems prevalent in
present times)
• Accountability and Transparency (Regulations must establish these
for all parties adopting it)
• Stability (Regulation must ensure stability of economies and
society)

16. Communication Plan

a. Internal and External Communication

i.Internal
• We recognize the importance of internal communication at various
levels through written, oral and digital means.
• Internal communication is helpful for establishing transparency and
ensuring accountability of involved parties.
• It will allow for the proper functioning and regulation of involved
parties.
• It will aid government overview and regulation.

ii. External
• External Communication is necessary for synergy between
countries.
• It will allow for global cooperation and integrated development.
• Helpful for establishing trust and spirit of mutual helping among
countries.
 • Create a forum for discussion, debate and cooperation on relevant
issues.

b. Reporting Structure
• Report must include introduction of the issue at hand, objectives parties
wish to achieve and vision and mission of the parties.
• There must be clear disambiguation and definitions of terms used in the
documentation.
• All provisions included must receive consent of majority members who are
relevent to the issue.
• The report must be unambiguous, clear and concise.
• It must provide sufficient evidence to back any claims made in the
documentation.
• Format and more precise guidelines can be decided by the committee.

c. Communication Tools and Channels

i.Some channels for communication among parties may include:
• Memos and public letters
• Bi-lateral and multi-lateral meetings
• Forums and established committees
• Emails and messaging
• Audio and video conferencing
*New mediums and forums for international and national communities are welcome to be
suggested by any and all parties.

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[Informal communication-Overview]
COUNTRIES-
The members of this policy are Argentina, Australia, Brazil, Canada, China, France, Germany,
India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Russia, South Africa, Saudi Arabia,
Türkiye, the United Kingdom, the United States, the African Union and the European Union.

INTERGOVERNMENTAL ORGANISATIONS-
United Nations, World Bank, International Monetary fund, Organisation for Economic
Cooperation and Development,World Intellectual Property Organization,UNESCO and the
financial action task force.

CONTRIBUTORS TO THE FRAMEWORK-

Indonesia-sections 14, 15, 16, formatting of framework
Germany- section 6, 7, 8, 9
China - Budget, Objectives
UN - Regulations on ICO, approval acquiring

Summary of the Framework-

The framework is inspired from similar previous implementations

• European Union AI Act: The European Union's AI Act aims to regulate AI systems by
providing a legal framework for their development and use. It includes provisions
related to transparency, accountability, data governance, and high-risk AI applications.
The act sets requirements for AI providers and imposes fines for non-compliance,
ensuring responsible AI practices.
The EU ensures that users are aware that they are interacting with AI and requires the
providers to disclose information about the AI system's capabilities and limitations.

• Markets in Crypto-assets Regulation (MiCa): MiCa is a regulatory framework proposed

by the European Commission to harmonise and regulate crypto-assets within the EU. It
aims to establish clear rules for issuers, service providers, and trading platforms,
enhancing investor protection and market integrity. MiCa sets standards for
authorization, disclosure, and operating conditions for crypto assets.
MiCa introduced measures within the EU to enhance investor protection, including mandatory
white paper publications, disclosure of risks, and rules to prevent market abuse. Its primary
focus is on safeguarding EU-based crypto asset investors.UARACAR would adopt and extend
these investor protection measures globally-
https://www.europarl.europa.eu/doceo/document/TA-9-2023-0117_EN.pdf to ensure that
investors from all countries benefit from enhanced protections when engaging with crypto
assets in the finance and banking sectors.

• Cryptocurrency Regulation in Japan: Japan has implemented comprehensive

regulations for cryptocurrencies, including the Virtual Currency Act. The regulations
require cryptocurrency exchanges to obtain licenses, implement KYC (Know Your
Customer) and AML (Anti-Money Laundering) measures, and ensure proper security
measures. Japan's approach promotes responsible trading and protects investors.
• Cryptocurrency Regulations in Switzerland: Switzerland has developed a reputation for
fostering crypto-friendly regulations. The Swiss Financial Market Supervisory Authority
(FINMA) classifies cryptocurrencies into three categories and applies different
regulations accordingly. Switzerland has provided clear guidelines on ICOs (Initial Coin
Offerings) and has established a supportive environment for crypto projects and
startups.
• Singapore's Payment Services Act: Singapore's Payment Services Act (PSA) regulates
various payment services, including cryptocurrency exchanges. The PSA requires
cryptocurrency service providers to obtain licenses, implement AML/CFT measures,
and comply with robust financial regulations. Singapore aims to balance innovation
with consumer protection through responsible cryptocurrency regulations.
• United States SEC and CFTC Oversight: The U.S. Securities and Exchange Commission
(SEC) and Commodities Futures Trading Commission (CFTC) provide oversight and
 regulation for cryptocurrencies and digital assets. The SEC focuses on securities
regulation and ICOs, while the CFTC oversees derivatives and futures markets. They
aim to ensure investor protection and promote responsible practices in the crypto
space.
• Cryptocurrency Regulation in South Korea: South Korea has implemented regulations
to enhance transparency and protect investors in cryptocurrency trading. The country
introduced the Special Payment Act, which obliges cryptocurrency exchanges to
comply with AML regulations and implement robust security measures. South Korea's
regulatory approach promotes responsible trading activities.
• Australia's Digital Currency Exchange Regulations: Australia has implemented a
registration and licensing framework for digital currency exchanges. The regulations
ensure compliance with AML/CFT requirements and customer identification processes.
Australia's well-defined regulations provide a safer environment for cryptocurrency
users and promote responsible conduct in the industry.
• International Monetary Fund (IMF) Recommendations: The IMF has developed
recommendations for regulating crypto assets, focusing on a comprehensive and
coordinated approach. Their recommendations include establishing legal foundations,
implementing AML/CFT measures, protecting consumer rights, and ensuring effective
international collaboration. The IMF promotes responsible crypto regulations globally.
• International Standard-Setting Bodies: Various international standard-setting bodies,
such as the Financial Action Task Force (FATF), play a crucial role in developing global
standards for crypto regulation. They provide guidelines on AML/CFT measures,
customer due diligence, and risk-based approaches to ensure responsible and
consistent regulation across jurisdictions.

Details-
1.There will be a unified global classification system for crypto assets. This system will provide
clear definitions and categories for different types of crypto assets, promoting transparency
and consistency for businesses and investors.

-UARACAR will establish a list of rules that member countries adopt as part of their national
legislation. This will define the regulations governing the use of crypto assets and AI in the
finance and banking sectors.

• The rules for AI-

UARACAR – Prohibition of Unacceptable AI Practices: UARACAR prohibits specific AI

practices that pose an unacceptable risk to individuals' rights, safety, or other legal interests.
This includes AI systems that manipulate human behaviour, exploit vulnerabilities, excessively
track individuals, or create social scoring systems.
High-Risk AI Systems: High-risk AI systems, such as those used in critical infrastructure,
healthcare, transportation, or law enforcement, require special safeguards. These systems
need to undergo a conformity assessment process, adhere to specific transparency and
documentation requirements, and be subject to human oversight.
Transparency and Explainability: AI systems must be transparent and provide explanations for
their outcomes. Users should be able to understand the system's functioning, purpose, and
potential limitations. This aims to prevent the use of "black box" AI and ensure accountability.
Data Governance and Quality: UARACAR emphasizes the importance of high-quality data to
mitigate biases and risks associated with AI systems. It encourages the use of diverse,
representative, and non-discriminatory data and sets requirements for data governance,
including privacy, security, and data protection measures.
Requirements for Providers: AI providers must comply with specific obligations, such as
ensuring the safety, security, and accuracy of AI systems. They are also responsible for
providing clear documentation, instructions, and appropriate human oversight when
deploying high-risk AI systems.
Independent Testing and Certification: High-risk AI systems must undergo an independent
conformity assessment process. This includes testing, validation, and certification by
authorized third-party organizations to ensure compliance with the regulatory requirements.
Prohibition of Certain Biometric Practices: UARACAR restricts the use of certain biometric
practices that may lead to undue infringement on individuals' fundamental rights, such as
indiscriminate mass surveillance using facial recognition technology in public spaces.
Member State Supervisory Authorities: UARACAR assigns supervisory authorities to each EU
member state, responsible for overseeing the application and enforcement of these rules. They
will have powers to conduct audits, request information, and impose administrative fines for
non-compliance.
Coordinated European AI Board: UARACAR establishes a European AI Board, comprising
national supervisory authorities, to ensure the consistent application and interpretation of the
AI regulations across member states. The board will facilitate cooperation and provide
guidance on AI best practices.

• Rules for crypto(EU agreed for CASPs to be implemented in the UARACAR)-

UARACAR - Authorization for Crypto-Asset Service Providers: UARACAR will establish a

framework for the authorization and regulation of crypto-asset service providers (CASPs). This
includes various entities involved in crypto-related activities such as custody, exchange, and
issuance of crypto-assets. CASPs will be required to meet specific criteria and be supervised
by competent authorities.

Consumer Protection and Investor Safeguards: UARACAR intends to enhance consumer

protection and increase investor safeguards within the crypto market. This includes measures
to ensure transparency, disclosure of risks associated with crypto-assets, and protection
against fraud, abuse, and market manipulation.

Capital Requirements and Safeguards: UARACAR aims to introduce capital requirements and
safeguards for CASPs to ensure their financial soundness and resilience. This will contribute to
the stability and integrity of the crypto market.
Stablecoins Regulation: GUARACAR proposes specific regulations for stablecoins, which are
crypto-assets designed to minimize price volatility. It aims to establish stringent requirements
for stablecoin issuers, such as capital buffers, governance, and reserve management
standards.

Harmonized Regulation Across the G20 members: UARACAR intends to establish a

harmonised regulatory framework for crypto-assets across the member countries , ensuring
consistent rules and standards that promote a level playing field and prevent regulatory
arbitrage.

1. Research and Analysis:

• Comprehensive research and analysis of current trends, challenges, and opportunities
in the banking and finance sector related to crypto assets and AI.

2. Stakeholder Engagement:
• Engaging with member countries, intergovernmental organisations, private sector
entities, and regulatory bodies to gather input and insights.

3. Framework Development:
• Collaboratively drafting a legislative framework that encompasses rules and standards
for crypto asset issuance, trading, and exchange, as well as guidelines for ethical AI use
in finance.

For Ethical AI use in Finance:

-Bias Mitigation Requirement:There will be a Bias mitigation system(Fairness-aware AI
algorithms-These algorithms are designed to recognize and rectify biases in AI models during
training and decision-making processes, ensuring that the AI system makes fair and unbiased
predictions. They incorporate fairness constraints and objectives into the model) that ensures
AI systems do not discriminate against certain demographics or make biassed decisions that
can negatively impact customers' financial opportunities.

-Explainable AI (XAI) Transparency Rule: Financial organisations will adopt Explainable AI

(XAI) technologies that provide clear, understandable explanations for AI-driven decisions.
This regulation aims to enhance transparency and ensure that customers can comprehend
how AI influences their financial transactions.

-AI Ethical Compliance Audits: mandatory periodic audits of AI systems will be done.
Independent auditors would evaluate the algorithms for fairness, transparency, and
adherence to predefined ethical standards.

-AI Ethics Ombudsman: An AI Ethics Ombudsman will be appointed for investigating and
addressing ethical concerns related to AI use and these checks will be conducted each week.
-AI-Assisted Customer Education: financial institutions will use AI to provide personalised
financial education and guidance to customers. AI systems would analyse individuals' financial
behaviours and offer proactive advice to improve financial literacy and responsible money
management.

-AI Chatbot with NLP(Natural Language Processing)that can analyse text-based

conversations and identify suspicious patterns.

-Using a voice biometric authentication that are verifies the speaker and their credibility,
along with unnatural speech patterns.

4. Regulatory Guidelines:
• Developing specific regulatory guidelines for different categories of crypto assets,
ICOs, and AI applications in finance.
(as done in the MiCa, AI act and for ICOs:
security

5. Compliance Standards:
• Defining compliance standards for financial institutions, AI developers, and crypto
asset providers to ensure responsible practices.

6. Investor Protection:
• Designing measures to protect investors from fraudulent schemes, market
manipulation, and scams in the crypto space.
-Requiring transparency
-using 3rd party audits
-AML and KYC regulations
-whistleblower protection
-Market surveillance
-Token Classification as securities, utilities, or commodities based on their characteristics.

7. Ethical AI Practices:
• Establishing ethical AI practices that promote transparency, fairness, and responsible
decision-making in AI-driven financial services.

8. Cross-Border Collaboration:
• Fostering international cooperation among member countries and organisations to
harmonise regulations, share information, and prevent regulatory arbitrage.

9. Training and Awareness:

• Providing training and awareness programs to financial institutions, AI developers, and
crypto asset providers to ensure compliance with the framework.Natural language
 processing (NLP) algorithms that can analyse the knowledge level of trainees and
adapt the difficulty of training materials accordingly.

10. Implementation:
• Phased implementation of the framework, starting with pilot programs using Fly
webinar AI series and gradually expanding its reach.

11. Monitoring and Enforcement:

• Setting up mechanisms for monitoring compliance with the regulations and enforcing
penalties for non-compliance.This will be done through RegTech-employs innovative
digital solutions to streamline and enhance regulatory compliance processes, making it
more efficient and effective for financial institutions and AI developers to adhere to
the established regulatory framework.

12. Continuous Improvement:

• Continuously reviewing and updating the framework to adapt to evolving technologies
and emerging risks.

13. Reporting and Transparency:

• Establishing reporting mechanisms to provide transparency on AI practices and crypto
asset activities in the banking and finance sector.

14. Evaluation:
• Periodic evaluations of the framework's effectiveness in achieving its goals, with
adjustments as needed.

15. Global Impact:

• Assessing the global impact of the framework, including its influence on responsible AI
practices and crypto asset regulations worldwide.

BACKGROUND:
The combination of artificial intelligence (AI) and cryptocurrencies in today's financial world
brings enormous prospects, but also fundamental concerns. AI offers efficiency and
personalised services, but it also requires ethical monitoring to avoid prejudice. Although
cryptocurrency transactions are borderless, they require regulation to safeguard investors and
preserve market integrity. This convergence necessitates a coherent strategy that harmonises
AI and cryptocurrency laws, respects ethical values, and ensures global financial stability.

IMPORTANCE:
By offering a consistent and adaptive regulatory framework, the consistent Approach intends
to stimulate responsible innovation, safeguard investor interests, and ensure financial
stability. It tackles the issues raised by the confluence of AI and cryptocurrency while
encouraging ethical behaviour and global collaboration.