Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
EU Delays Enforcement of Landmark AI Act Amid Backlash
AI Regulation | May 29, 2025
Image: Freepik/luis molinero
EU Rethinks AI Law As Canada's AI Regulatory Framework Up in the Air
In March 2024 last year, the European Union adopted the AI Act, the world’s first comprehensive regulatory framework on artificial intelligence. It follows a risk-based approach, categorizing AI systems into four tiers based on risk with the highest risk systems facing strict requirements around data governance, transparency, human oversight, and cybersecurity. Fines for noncompliance can reach up to €35 million or 7% of global revenue.
However, according to Sifted the European Commission's President Ursula von der Leyen's team is now considering to delay enforcement of the EU's AI Act to introduce changes that will simplify the law. The delay was triggered by concerns from startups, global tech firms, and even non-EU governments, highlighting tensions between innovation and oversight in AI regulation. It also puts renewed pressure on countries like Canada, where formal legislation remains stalled, to clarify their position on AI governance in an industry moving faster than light.
Europe Hits the Brakes on Its AI Playbook
One of the core controversies is how AI systems are categorized, since higher risk systems face the most rigorous requirements. For example, when AI is used to perform a type of 'social scoring' it's banned outright. Many firms warned at this framework could backfire.
Earlier this year, Capgemini CEO Aiman Ezzat warned that "the EU went too far" making the deployment of AI too difficult compared to other jurisdictions like the U.S and Asia.
See: UK Authors Might Earn Royalties from AI Training
Others, including some lawmakers in the European Parliament cursed the delay as a capitulation to Big Tech. A letter from several MEPs called any move to make compliance optional “dangerous and undemocratic”.
Adding to the pressure, the U.S. Trump administration submitted a letter challenging the EU Commission's guidelines for advanced AI systems saying that the framework would create regulatory burdens and stifle innovation.
Canada's AI Law Died
In 2022, Bill C-27 or the Artificial Intelligence and Data Act (AIDA) was introduced to regulate high impact AI systems but the AIDA bill died on the order paper when Parliament was prorogued in January 2025. So instead of an AI law, the Canadian government issued a Voluntary Code of Conduct for Advanced GenAI Systems. While this level of guidance is useful, it's not enforceable so it lacks the 'stick and carrot' that these global AI firms need.
Regulatory Comparison: EU vs Canada
| Feature | EU AI Act (2024) | Canada’s AIDA (Status: Dead Bill) |
| Legal Status | Enacted March 2024 | Died in January 2025 |
| Enforcement | Mandatory with fines up to €35M / 7% of turnover | Voluntary code; no penalties |
| Risk Classification | 4 levels: banned, high, limited, minimal | Focus on “high-impact systems” (undefined) |
| Implementation Timeline | Staggered from 2025 to 2027 | Not applicable |
| Market Reach | Extraterritorial (global firms included) | Focused on domestic AI systems |
Why It Matters for Canadian Fintechs and AI Startups
The EU’s AI Act framework has extraterritorial reach, meaning Canadian firms offering services in Europe could fall under its scope regardless of where they’re based. So Canadian fintechs developing credit risk scoring models, biometric ID systems, or fraud detection tools for European markets, are breathing a sigh of relief given the current pause.
See: Why No Code AI Agents Matter for Fintech in Canada
At the same time, Canada’s lack of enforceable AI legislation creates uncertainty. Without clear national rules, companies must operate in a fragmented environment of global regulatory expectations. With PM Carney now at the helm, Canada could update its regulatory approach to a more innovation-friendly framework. One that's interoperable with Europe but grounded in domestic market needs.
Outlook
The EU AI Act’s pause is a warning that global AI regulations are still up in the air. So companies need to be agile, stay informed and proactive. Canadian fintechs and AI developers operating globally should use this strategic window of time to impact emerging norms while preparing for stricter enforcement ahead.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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