An Italian regulator has announced it has banned US artificial intelligence company Replica from collecting personal data to create "virtual friends", warning of risks to minors and the emotionally fragile.

Founded in 2017 in San Francisco, Replica offers avatars that customers use to chat. Its free app is well-received among English speakers, and revenues are about $2 million a month, mostly from the sale of add-on features such as voice chat.

The startup claims that virtual friends can improve the user's emotional state. The Italian regulator believes that the mood intervention "may increase the risks for individuals who are still in the development phase or are emotionally fragile".

They also warned that the app does not include a mechanism to verify the user's age. Replica also violates European privacy regulations and illegally processes personal data, regulators stressed late last week, explaining that the app is not based on contracts because minors cannot sign them.

The authors of "Replika", the American company "Luca", within 20 days have to submit to the regulator a report on the measures they have taken to fulfill their requirements. Otherwise, they face a fine of up to 20 million euros or up to four percent of the world's annual turnover.