Global Glance: February 16, 2016

A quick look at intriguing international stories

By John Bostwick, Managing Editor, Radius

Welcome back to Global Glance. This week we look at:

• Blockchain and why it’s time you got educated
• Key points of the EU-US Privacy Shield agreement
• The UK’s EU referendum and the expat factor

Blockchain: It’s Time You Got Educated

Unless you’re a deep-web type you probably don’t use bitcoin or know much about blockchain, the electronic architecture that makes bitcoin and other cryptocurrencies work. Blockchain in particular has been in the news in recent months. But it’s such a complicated subject that it’s often torturous to read about and try to understand. If you think I’m exaggerating check out this howler of an excerpt from a recent Microsoft press release: “Microsoft and ConsenSys are partnering to offer Ethereum Blockchain as a Service (EBaaS) on Microsoft Azure so Enterprise clients and developers can have a single click cloud based blockchain developer environment.”

Despite the jargon and sometimes complicated concepts associated with blockchain technology, it’s a subject worth educating yourself about. Also known as “distributed ledger technology,” blockchain is poised to effect massive changes across many business sectors, in particular the financial industry. According to a 2015 Santander report, “distributed ledger technology could reduce banks’ infrastructure costs attributable to cross-border payments, securities trading and regulatory compliance by between $15-20 billion per annum by 2022.” In other words, there are huge sums of money involved, and many will stand to gain — and lose — a great deal from blockchain technology as it becomes widely used.

Let’s begin with an undated article in Wired, which is a good introduction to blockchain and why it’s important. For starters the article notes that blockchain’s ramifications could be so profound that some experts “go so far as to say it is like watching the birth of the internet all over again.” The article goes on to explain that blockchain is a protocol used to verify that bitcoin and other cryptocurrency transactions are valid and unique. Very broadly speaking, individuals called “miners” undertake this transaction-verification process using software, and they’re compensated in cryptocurrency.

The article continues: “Every few minutes a ‘block’ of all the transactions occurring over the bitcoin network is created by a miner” and “as each transaction in every block is made at a specific time, each block is linked to the previous block of transactions. By grouping these blocks we get what is referred to as the Block Chain.” Each block in the chain, then, is a file containing verified — and verifiable — transactions that occurred on a cryptocurrency network over a given time period. In short, blockchain creates order our of a chaotic currency network, though that order is not imposed by a single authority.

Blockchain protocol is also a feasible means of making small-amount transactions, or “micropayments.” Wired explains that blockchain protocol “allows the instant transfer of value irrespective of size.” This has major implications for the shared economy. The ability to easily make cheap micropayments will enable consumers to use cryptocurrency “to tip a content creator with a small sum (even 5 cents) instead of just liking an article.”

For additional clear information on blockchain, check out “CIO Explainer: What Is Blockchain?” published this month in The Wall Street Journal. It emphasizes that blockchain is still in the experimental stages for virtually all large institutions, and that the technology itself is constantly evolving. And it indicates that not all blockchains operate the same way: “The bitcoin blockchain, for example, is public and ‘permissionless,’ meaning anyone can participate and contribute to the ledger. Many firms also are exploring private or ‘permissioned’ blockchains whose network is made up only of known participants.”

The Journal article also notes that blockchain could effectively eliminate the need for a centralized authority or middleman in payment transactions, since each computer in a network would essentially share a general ledger of related transactions. (Hence the term “distributed ledger technology.”) But despite the control environment that blockchain seeks to establish, it is a new technology that “will bring its own regulatory hurdles and potential cybersecurity threats.” In addition, the financial industry has not yet agreed on “a common network protocol and technology stack,” or whether to use “the bitcoin network, or ‘permissioned’ or semi-private blockchains.”

That’s a lot to take in, but some of you may still want to get your blockchain on. If so, check out part two of the Journal’s article, titled “Blockchain: Catalyst for Massive Change Across Industries.” It underscores the facts that blockchain technology has not been widely adopted, but that “the level of commitment to testing and development, especially in financial services, shows how seriously blockchain is viewed in the corporate world.”

So in a time when the tiresome word “disruption” is tossed around like a beanbag at a cornhole tournament, the term might actually be appropriately applied to blockchain. Just know that you won’t be the first to have done so.

The EU-US Privacy Shield: Key Points

Radius blog subscribers are well versed in data protection trends, thanks largely to my coworker Stuart Buglass. He’s written numerous informative posts on the subject, including one about the European Court of Justice’s October 2015 declaration that the EU-US Safe Harbor data sharing arrangement was invalid.

Safe Harbor, or really its successor agreement, is in the news again. On February 2, the European Commission issued a press release announcing a new framework for transatlantic data flows known as the EU-US Privacy Shield. It’s intended to “protect the fundamental rights of Europeans where their data is transferred to the United States and ensure legal certainty for businesses.” Here’s more from the release: “The new arrangement includes commitments by the US that possibilities under US law for public authorities to access personal data transferred under the new arrangement will be subject to clear conditions, limitations and oversight, preventing generalized access. Europeans will have the possibility to raise any enquiry or complaint in this context with a dedicated new Ombudsperson.”

Clearly, that point about US “public authorities” is aimed at US intelligence agencies. The Safe Harbor agreement was declared invalid as a result of a case brought by a European citizen in response to, as Buglass remarked in his Safe Harbor blog post, “Edward Snowden’s revelations about the US National Security Agency’s Prism program, including the fact that the program conducted covert surveillance of EU data held in the US.”

On the day the European Commission announced the EU-US Privacy Shield framework, a New York Times article observed that the new agreement “aims to address those privacy concerns and strike that balance by including written guarantees by the United States — to be reviewed annually — that American intelligence agencies would not have indiscriminate access to Europeans’ digital data when it is sent across the Atlantic. Whether that provision will reassure privacy-rights groups remains to be seen.”

An article last Tuesday in ETC News Network emphasized that the recent EU-US Privacy Shield is just a draft, that its “details will be worked out over the next two months,” and that “uncertainty” over the agreement will likely persist even after it’s finalized. Importantly, the article indicates that EU authorities “will hold off on enforcement actions until Privacy Shield is finalized,” and that the agreement “appears to be a stopgap measure intended to buy more time for EU and US negotiators.”

The ETC article quotes Radius’ own Stuart Buglass on the subject: "Enforcement action on the scale required would be totally overwhelming for the national data protection authorities. … A prolonged moratorium was inevitable. The announcement on the Privacy Shield provided a reason for doing so.” (Here’s a hot tip for you Global Glancers: Buglass is helping develop a Global Data Protection Playbook, to be published in the coming weeks on our Resources page.)

For another, potentially controversial opinion on the subject, check out Larry Downes’ article “The Business Implications of the EU-US ‘Privacy Shield,’” published last Wednesday in Harvard Business Review. Downes contends that the Privacy Shield “will likely do nothing to add even a modicum of new protection to the personal information of European citizens.” Furthermore, according to Downes, privacy protection might not have been the impetus for the program in the first place, and that there are indications that “the privacy red flag is being waved more to hamstring US tech giants than to protect EU citizens.”

The UK’s EU Referendum and the Expat Factor

No later than December 31 of next year, and probably well before that, the UK will hold a referendum in which voters will answer the following (well-phrased) question: “Should the United Kingdom remain a member of the European Union or leave the European Union?” This is known as the European Union Referendum Act 2015. You can track the progress of the bill and get the latest related news on this page of the UK Parliament’s website.

For an excellent synopsis — including why the referendum is being held, who within the UK does and doesn’t want to leave the EU, and even what a referendum is — read “The UK's EU Vote: All You Need to Know,” published last Monday in BBC News. It explains that “the British public [is] fairly evenly split, according to the latest opinion polls.” As for politicians, “a fair number of Conservative MPs — and several Labor ones — are … in favor of leaving,” as they feel “Britain is being held back by the EU, which they say imposes too many rules on business and charges billions of pounds a year in membership fees for little in return.”

On the other hand, Prime Minister David Cameron “wants Britain to stay in the EU, once he has got some powers back from it,” and “the Labor Party, SNP, Plaid Cymru and the Lib Dems are also in favor of staying in.” For the most part, BBC News adds, big business “tends to be in favor of Britain staying in the EU because it makes it easier for them to move money, people and products around the world.”

Some of those in favor of leaving the EU, BBC News notes, “want Britain to take back full control of its borders and reduce the number of people coming [to the UK] to work.” For a good short piece addressing the other side of this issue — that is, the ability of UK citizens to move freely within the EU — read Alex Taylor’s piece, “Expats Are Being Frozen Out of Europe,” published last Thursday in The Telegraph. According to some estimates, writes Taylor, “there are more or less the same number [of UK expats in the EU] as EU citizens in the UK (about two million.)”

Taylor himself has lived in France for over thirty years. He writes: “A lot of us work and take advantage of public health systems and social benefits in our adopted countries. There are some 800,000 retired UK citizens in Spain alone, who are free to use the Spanish health system (and therefore don’t take up valuable [UK National Health Service] beds).” If UK citizens vote to leave the EU, these roughly 2 million UK expats “will be stranded and no longer have equal rights as the citizens of the countries we live in.”

My guess is that UK citizens who vote to leave the EU won’t much care about the rights of UK expats like Taylor. But he makes the excellent point that UK expats in EU countries might seriously strain Britain’s social services apparatus if Britons vote to break from the rest of Europe. “No one,” he writes, “seems to have thought of contingency plans if we all have to come home.”