AI Regulation Convergence: California and EU
Although a comprehensive U.S. federal AI regulatory still does not exist, independently developed regulatory regimes in California and the EU, respectively, show striking convergence. Both require organizations to move beyond informing consumers that AI has been used and instead build “technical systems that make AI-generated content detectable.”
“Rather than treating AI transparency as a consumer disclosure obligation, companies are increasingly being required to embed technical controls, governance processes and audit capabilities into the way AI-generated content is created, distributed and managed.”
The consequence of this new approach is that implementation no longer rests with legal/communications departments, but must also involve software developers, cybersecurity teams, compliance officers, records managers, and third-party risk specialists. In addition, a firm’s obligations extend to AI services provided by third party vendors.
Why It Matters:
The third and fifth largest economies in the world adopting similar approaches to AI regulation provide a good indicator of where AI regulation is headed in general. This makes it all the more critical that organizations prepare to meet these new regulatory requirements (California’s take effect in 2027).
Zaria Seeks Bank Charter
Zaria Servicing LLC functions as an independent fiduciary, primary loan servicer, collateral agent, and backup servicer for third-party institutional clients—including banks, fintech lenders, specialty finance companies, asset managers, and warehouse lenders in the United States and through partnerships in other countries. Recently, it organized a trust company subsidiary (Zaria National Trust Company) and applied for an OCC charter for a special-purpose national bank that will limit its activities to the operations of a trust company and related activities.
The firm’s differentiator is that it can support financing/lending secured by both traditional and digital assets including crypto. It also provides consulting services. Outside the United States, its services are offered under partnerships with local payment firms and other financial organizations.
Why It Matters:
Zaria’s OCC charter application reflects a growing trend by fintechs to migrate their operations under national bank charters that offer benefits beyond regulatory simplification and transparency. Depending on an institution’s business model and approvals, an OCC charter can provide a single federal supervisory framework, expand lending and deposit capabilities, reduce dependence on third-party banking partners, and give institutions greater authority over product development and customer relationships.
OCC Denies Bunq Charter
Bunq sought to bring its European digital bank model to the US. However, the OCC took issue with the bank’s capitalization because it cited different sources and amounts during review and did not provide sufficient evidence that the funds would be available. The OCC also questioned the experience of Bunq’s management and directors with U.S. banking laws and with the U.S. unsecured credit card market.
Why It Matters:
“More important for other applicants, the OCC challenged assumptions imported from Europe. The regulator said Bunq relied on European delinquency projections when estimating losses on a U.S. unsecured credit-card portfolio. Its allowance for credit losses fell below those of OCC-supervised credit-card banks, and revised projections did not come with analysis sufficient to persuade the agency.”
CLARITY Act Could See Full Senate Vote in September
Senate leadership has scheduled the CLARITY Act for what is called a “procedural” vote when the Senate reconvenes in mid-September, which would set the stage for a full floor vote. However, there is low probability that it could reach a full floor vote before the November elections which could upend its passage in the near term.
Why It Matters:
“The CLARITY Act would provide the crypto industry with its first comprehensive rulebook, establishing when digital tokens are securities or commodities and whether they would be regulated by the Securities and Exchange Commission (SEC) or Commodity Futures Trading Commission (CFTC).”
