In the rapidly evolving landscape of technology, artificial intelligence (AI) and blockchain are emerging as transformative forces poised to redefine economies and societies. Yet, the European Union, which constitutes a mere 7% of annual equity investments in these groundbreaking technologies, faces stiff competition from the U.S. and China, who collectively command a staggering 80%. Nevertheless, Europe boasts unparalleled research capabilities and a wealth of digital talent, setting the stage for an exciting shift.
The report titled “Artificial Intelligence, Blockchain, and the Future of Europe”—a collaborative effort by the European Investment Bank and the European Commission—underscores the urgent need for Europe to address a projected €10 billion investment gap. This gap threatens to stifle the development and implementation of AI and blockchain technologies across the continent. 
Understanding AI and Blockchain
Artificial intelligence represents the quest to create machines that can perform tasks traditionally requiring human intelligence, utilizing advanced methodologies such as machine learning, neural networks, and deep learning.
Conversely, blockchain serves as a revolutionary framework for managing digital information, offering a decentralized and encrypted method of recording transactions. This technology facilitates the creation of secure, tamper-proof databases that can only be modified by authorized users.
In essence, AI can be seen as the “thinking” component while blockchain acts as the “memory.” The convergence of these technologies presents a wealth of opportunities for innovative products, services, and even governance models.
The Imperative for Investment in Europe
AI and blockchain are transversal technologies with the potential to disrupt a myriad of sectors. Their successful implementation will be vital in advancing Europe’s green and digital transitions while fortifying its technological independence.
Failure to invest adequately in these areas could result in Europe losing its competitive edge in key industries, including finance, e-commerce, and manufacturing. Moreover, underfunding in research and development for AI could have dire implications for national security, particularly in defense. AI is anticipated to significantly impact the achievement of Sustainable Development Goals (SDGs), particularly in climate initiatives and the promotion of diversity and inclusion, including “gender-smart” technological advancement.
Key Findings from the Report
The report highlights a concerning trend: Europe is lagging behind its global competitors in both the development and application of AI and blockchain technologies. However, the EU’s strong foundation in high-quality research and its extensive pool of digital talent provide a solid basis for advancement.
To bridge the gap, three critical areas of focus emerge:
- Development: Enhancing R&D capabilities to foster innovation.
- Market Deployment: Ensuring that developed technologies reach the market effectively.
- Innovation Ecosystem: Strengthening the wider EU innovation framework to facilitate collaboration and resource sharing.
The study identifies a significant lack of financing available for scaling EU businesses. Furthermore, it notes that European innovation hubs must improve connectivity to enhance the flow of talent, experience, and funding.
In contrast to major economic players, Europe exhibits no inherent structural barriers preventing the deployment of these technologies. Despite the U.S. and China capturing over 80% of the €25 billion annual investment in AI and blockchain, the EU’s investment remains stagnant at around €1.75 billion.
Investment Landscape and Challenges
While the EU’s venture capital ecosystem is commendable in providing early-stage funding to AI and blockchain small and medium-sized enterprises (SMEs)—accounting for 10% of total VC investments—it falls short during later funding rounds essential for expansion.
Despite widespread interest in AI across various sectors, the deployment of these technologies remains uneven. Notably, while a significant proportion of AI firms in Europe focus on information and communication technologies, a larger share of Chinese firms are concentrated in the manufacturing sector, highlighting the latter’s strength.
The Path Forward
All major global economies are racing to secure a leadership position in AI and blockchain, and Europe, despite its scientific prowess, faces challenges primarily in securing adequate financing. Emerging startups require substantial support to compete on the global stage, and interconnected ecosystems are vital for translating innovative ideas into commercial success.
The European Commission is taking steps to bolster these technologies, having allocated €1.5 billion for AI through the Horizon 2020 program from 2018 to 2020. The Digital Europe Programme (DEP) aims to invest an additional €2.5 billion between 2021 and 2027, enhancing access to AI for businesses and public entities.
On the investment front, the European Investment Bank (EIB) has launched a €150 million co-investment facility to partner with fund managers and private investors. Moreover, the European Investment Fund (EIF) has initiated a pilot scheme for a dedicated €100 million investment strategy focusing on AI and blockchain. Additional resources from the Multiannual Financial Framework and the post-pandemic NextGenerationEU programme are also being directed towards strategic technologies.
In Summary: A Future Full of Promise
The intersection of artificial intelligence and blockchain heralds a new era of opportunity for Europe. By closing the investment gap and fostering a robust innovation ecosystem, Europe can capitalize on its unique strengths to become a global leader in these transformative technologies. As the continent embraces this challenge, the potential for a greener, more digital economy becomes not just a possibility, but an exciting reality.
About the Author:
Ian Scarffe is a serial entrepreneur, investor, key opinion leader and Blockchain consultant with business experience from around the world.
An expert in Startup, Investment, Fintech, Web3, AI, ETF, Digital Assets and Blockchain.
Ian currently consults and advises for a range of multi-million dollar companies.
Ian’s overall mission is to foster a society of economically independent individuals who are engaged citizens, contributing to the improvement of their communities across the world.
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https://uk.linkedin.com/in/ianscarffe
