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The unintended consequences of AI regulation in Europe: a startup killer?

Europe’s new AI regulation threatens to become a brake on innovation, favouring the tech giants and nipping the potential of start-ups in the bud, writes AI entrepreneur Christian Fehrlin in a guest article.

In an ambitious attempt to curb the growing power of artificial intelligence (AI), the European Union has proposed rules in the AI Act that are more Goliath’s privilege than David’s advantage. At first glance, these regulations, which cover complex technologies such as large language models (LLMs) and facial recognition systems, appear to represent progress towards ethical and safe AI. But a closer look reveals them to be a stranglehold for start-ups and smaller companies in the AI sector.

While tech giants like Google and OpenAI with their huge data pools and financial resources can easily manoeuvre their way through the maze of compliance and data protection regulations, start-ups and small companies face almost insurmountable hurdles. Regulation, which was intended as a levelling shield, is becoming an insurmountable wall for newcomers and SMEs.

AI Act favours exclusive club for big tech

At first glance, the disproportionate data protection and compliance requirements sound trustworthy and security-oriented. However, they indirectly favour an exclusive club in which only the established data giants are members. Smaller players that could bring innovative solutions and fresh ideas to the AI market are massively slowed down as a result, as they have no data of their own that they can use to train their models.

Europe risks turning into an innovation-hostile fortress that is disconnected from global developments in the technology sector. Regulation in its current form is not a sign of progress, but rather a retreat into a risk-averse, stagnating technology landscape.

Regulation must offer flexibility and practicability for SMEs

The EU must find a regulatory approach that masters the balancing act between protecting citizens’ rights and promoting innovation. An approach that offers flexibility and practicality for smaller companies, while maintaining ethical and safety standards.It is high time that we move away from a one-dimensional, restrictive view of AI regulation and instead adopt a dynamic, multi-layered approach that not only preserves but actively promotes diversity and dynamism in the European tech ecosystem. This is the only way to ensure that Europe can not only keep up in the global technology race, but emerge as a leader in ethical and innovative AI technology.

This article was first published as a commentary on our ICT news platform Inside IT.