Digital Watch newsletter – Issue 54 – October 2020

​

Each month we analyse hundreds of unfolding developments to identify key trends in digital policy and their underlying issues. These were the trends in October.

1. Central bank digital currencies gain momentum

October was marked by several developments related to digital currencies in general and central bank digital currencies (CBDCs) in particular. Unlike well-known cryptocurrencies such as bitcoin, CBDCs would be issued by central banks and be part of a country’s official monetary system. 

CBDCs are considered an evolution in the monetary system, with both advantages and considerable challenges not only regarding financial policies, but also in other digital policy areas (e.g. privacy, security, financial inclusion). In recent years, central banks around the world have started looking into the prospects of issuing such currencies, a subject they have been treating with caution. 

This month, two developments seem to indicate that CBDCs might be moving closer to reality (though not necessarily in the immediate future). The Bank for International Settlements (BIS) together with seven central banks issued a report outlining the foundational principles and core features of CBDCs. The report notes that authorities considering the issuance of a CBDC need to first ensure that this would not compromise monetary or financial stability, and that a CBDC would coexist with existing forms of money. If such principles are met, CBDCs could bring innovation and efficiency, while also supporting central banks in their public policy objectives. 

At the EU level, the ECB published a report on the possible issuance of a digital euro, noting that the Eurosystem needs to be equipped to issue such a digital currency in the future, considering the need to adapt to the evolving retail payment landscape, as well as the possible advantages that a digital euro would bring. Just like the BIS report, this document notes that the issuance of a digital euro should be done in such a way that it avoids possible negative effects on financial stability, the financial industry itself, and the broader economy. 

Both reports could be seen as an indication that central banks are increasingly opening up to the idea of issuing CBDCs as a way to bring innovation in the financial systems and adapt to the realities of the growing digital economy. Read more below.

2. Content policy developments intensify

In the run-up to the  US presidential election, October was rich in developments related to content policy, particularly in the area of misinformation. In the USA, Twitter brought changes to its policies to further ‘protect the integrity of the election conversation’, while Facebook announced that ads about social issues, elections or politics would have to be booked before 27 October, and that all issue, electoral or political ads will be banned from 4 November. These actions, however, are seen as insufficient by Mozilla and over 6000 Internet users, who sent an open letter to both companies asking them to deactivate features that can amplify election misinformation.

Twitter and Facebook stirred controversy when they limited the reach of a New York Post article, leading to fresh calls for the revision of Section 230 of the Communications Decency Act, which limits the Internet platform’s liability concerning the content they host. The CEOs of the two companies have now been called to testify in Congress in November on this and related issues. Meanwhile, the chairman of the Federal Communications Commission (FCC) announced plans to interpret Section 230.  

In Europe, the European Parliament has taken up the issue of platform liability regarding illegal and harmful content in the resolutions it has recently passed outlining recommendations for the future Digital Services Act (DSA). In the Parliament’s view, a clear distinction needs to be made between the two types of content, and the legal liability regime should apply to illegal content only as it is defined in national or EU legislation. The EU legislative body also argues that platforms should not be allowed to use upload filters to identify and remove harmful or illegal content.

These and related developments demonstrate that there are plenty of issues to be clarified not only about misinformation, but also about harmful content in general. One of the problems is deciding what constitutes harmful content. Governments expect companies to have policies that tackle all harmful content, while companies expect clear rules that provide them with a legal basis to act. A second issue relates to the cases in which companies should be held accountable for their actions/inactions. Governments want companies to be held liable when they wilfully allow the distribution of content or censor it without basis. Companies agree to be held (proportionally) responsible, but want to be free to implement their own systems. 

The next few weeks will be quite telling, both regarding Section 230 and the FCC’s next steps, and the upcoming DSA package which will be presented by the European Commission on 2 December.

3. The governance of artificial intelligence and other advanced technologies in focus

As artificial intelligence (AI) and other advanced technologies evolve and increasingly find their way into every aspect of our economies and societies, efforts intensify to regulate such technologies and ensure they are developed and used in line with core values and national/regional interests. 

In the USA, President Trump has released a National Strategy for Critical and Emerging Technology establishing priority actions to protect the country’s national security innovation base and secure technology advantage. The document provides a useful taxonomy of what can count as critical technologies from a national security perspective; for the USA, such technologies include, among others, advanced computing, AI, autonomous systems, biotechnologies, distributed ledger technologies, human-machine interfaces, and quantum information science. One of the strategy’s key goals is that the USA should lead the development of global norms, standards, and governance models for these technologies, in lines with US democratic values and interests. 

The increasing importance that the USA is placing on technology standards is also reflected in the recent establishment of the Center for Cybersecurity Standards by the National Security Agency. The new centre has a clear mandate to engage with different standardisation processes at the international level – a role particularly relevant in the context of ongoing discussions on possible new standards for the Internet, as proposed in the framework of the International Telecommunication Union (ITU) standardisation work.

In Europe, we see an accelerated path towards the regulation of AI. The Council of Europe’s Parliamentary Assembly has called for a legally binding instrument to govern AI, in line with principles of human rights, democracy, and the rule of law. At the EU level, the European Parliament has issued three resolutions dealing with the ethical aspects of AI, a civil liability regime for AI, and intellectual property in the development of AI. In addition, the Presidency of the Council of the EU has issued a set of conclusions on AI and fundamental rights, calling on the EU and national governments to assess whether existing EU and national laws are adequate to govern AI or whether further regulations are needed. All these documents indicate that the EU approach is to start with applying existing rules (covering issues such as data governance, intellectual property, liability, etc.) to the development and use of AI, and then see what missing elements need to be introduced to achieve a comprehensive AI governing framework. 

It is clear that countries and regional organisations will continue to pay increased attention to the interplay between advanced technologies and economic and security interests, as well as human rights and democratic values. It remains to be seen whether and how the various interests and policy approaches will converge towards international standards and regulations.

​

​

The digital policy landscape is filled with new initiatives, evolving regulatory frameworks, and new legislation and court judgements. In the Digital Watch observatory – available at dig.watch – we decode, contextualise, and analyse ongoing developments, offering a digestible yet authoritative update on the complex world of digital policy. The monthly barometer tracks and compares the issues to reveal new trends and to put them into context with those of previous months. The following is a summarised version; read more about each development by clicking the blue icons, or by visiting the Updates section at the observatory.[link]

In October, cyber-norms was the buzzword around the virtual UN corridors. Multiple governments tackled the issue of cyber-norms under the auspices of the First Committee of the UN General Assembly (UNGA).

France's Programme of Action

Given developments in the field of information and communications technology (ICTs) in the context of international security, France and 40 other countries put forward a proposal to advance responsible state behaviour in cyberspace. The proposal explores the possibility of establishing a Programme of Action (PoA) aiming to end ‘dual track discussions’ (the UN Group of Governmental Experts (GGE) and the Open-Ended Working Group (OEWG)), and establishing ‘a permanent UN forum to consider the use of ICTs by States in the context of international security’.

The proposal suggests that the PoA should be a single, long-term, inclusive, and progress-oriented format, whose modalities could be discussed by the ongoing GGE and OEWG. Its implementation and follow-up measures could be subsequently endorsed by the UNGA. The PoA could ‘create a framework and a political commitment’ based on the recommendations, norms, and principles already agreed on (referred to as acquis); in particular the 2015 UN GGE report which was adopted by UNGA Resolution 70/237. The PoA would have regular annual working-level meetings, focused on the implementation of the existing framework. A possible national survey of implementation of UNGA Resolution 70/237 could be used as a basis. The PoA would step up cooperation and capacity building and organise consultations with other stakeholders. Regular review conferences would allow considering whether additional norms should be developed. The proposal invites the reports of the ongoing GGE and OEWG to call for the creation of the PoA.

Singapore's norms implementation checklist

A few days later, Singapore announced that it will cooperate with the UN Office for Disarmament Affairs (UNODA) to develop a norms implementation checklist. The checklist will help countries identify the cyber capacities needed for the implementation of the 11 voluntary norms set in UNGA Resolution 70/237. This will build on the norms chart developed in 2019 at the Association of Southeast Asian Nations (ASEAN) Ministerial Conference on Cybersecurity, and which will be refined to apply to a wider range of UN member states. As Singapore is among the countries that have supported France’s PoA, and as UNODA serves as a secretariat to the GGE and the OEWG, it is possible that the checklist will be used in the national survey of implementation of UNGA Resolution 70/237 mentioned in the PoA.

China's proposal on rules on data security

Also under the auspices of the First Committee but in the context of a 'new development of international division of labor', China has proposed developing a set of international rules on data security, building on its Global Initiative on Data Security (GIDS). Announced in September, the initiative invites states and other stakeholders to maintain the global ICT supply chain, handle national data security in an evidence-based manner, and stand against stealing and misusing important data from the critical infrastructure of other states. The initiative calls for states to (a) oppose mass surveillance against other states, (b) not request domestic companies to store others’ data in their own territory, (c) respect the sovereignty of data of other states, (d) not obtain data located overseas through their own companies, and (e) utilise judicial assistance mechanisms to obtain cross-border data for combating cybercrime. 

The proposal calls for ICT product and service providers to refrain from (f) implementing backdoors, (g) taking advantage of users’ dependence on certain ICT products, or (h) forcing users to upgrade their systems. Providers should also commit (i) to the timely notification of critical vulnerabilities in their systems, in addition to (j) offering remedies for such vulnerabilities. 

More to come

It is notable that two biggest cyber powers – the USA and Russia – have not expressed their support for any of the proposals. Yet the two are drafting their own resolutions: the USA, one to postpone decisions on the further formats for institutional dialogue until the expiry of the GGE mandate next year, and Russia, one to propose that the new OEWG has a longer mandate.

​

One of the biggest lawsuits against Big Tech has just been filed. In October, the US DoJ together with 11 states filed an antitrust lawsuit against Google, accusing it of abusing its market power. While the case will take years to resolve, this could lead to Google’s breakup, much like the emergent ‘Baby Bells’ of the 1980s.

The antitrust lawsuit has ended months of speculation about whether the US government will take action anytime soon. It is also the culmination of months of investigations, led by the Antitrust Subcommittee of the House Judiciary, which hopes for one main outcome: Google’s breakup into smaller pieces.

The main complaint against Google is related to its dominant position in the search and advertising markets, and claims that the company has abused its market power to shut out competitors. The DoJ’s lawsuit claims that Google

• is acting as a gatekeeper to the Internet and uses unfair practices to shut out competitors. 
• uses billions of dollars collected from its advertising business to pay mobile-phone manufacturers, carriers, and browsers to maintain Google as the default search engine.
• preloads its applications on mobile phones running on the Android operating system. 
• unlawfully prohibits competitors’ search applications from being preloaded on phones under revenue-sharing arrangements.

Beyond Google

During the proceedings, both sides will make compelling arguments. From the government’s side, many of the issues have also been detailed in the House Judiciary Antitrust Subcommittee’s 7 October report ‒ another long-awaited development in the antitrust battle against Big Tech, the result of a 16-month investigation. 

Acknowledging that each company differs in important ways, the 450-page report notes several common problems in the business practices of Google, Apple, Facebook, and Amazon (collectively known as GAFA). It describes each platform as a gatekeeper of a key distribution channel, therefore controlling access to markets. It claims the companies are abusing their power by charging exorbitant fees, imposing oppressive contract terms, and extracting valuable data from the people and businesses that rely on them. It also claims that the companies have surveilled other businesses to identify potential rivals, ultimately buying out, copying, or cutting off their competitive threats.

For the government, one of the most sought-after solutions is that the companies should have parts of their businesses broken up, specifically, ‘to prohibit platforms from operating in lines of business that depend on or interoperate with the platform’.

Rebuttals 

In their July testimony during the House Judiciary Antitrust Subcommittee’s hearing, the GAFA CEOs made compelling arguments about the large investments the companies make in the USA, and the thousands of jobs they have created.

If the arguments made by the CEOs during the July hearings are anything to go by, Google will also be making strong arguments during the antitrust proceedings. Among them is the question of choice. Calling the lawsuit ‘deeply flawed’, Google believes that people use the tech giant’s services ‘because they choose to ‒ not because they’re forced to or because they can’t find alternatives’. 

The issue of choice will strike a deep chord among users who feel that Google dominates their everyday choice and may therefore attract even stronger reactions from users. One of the questions, in fact, is whether Google’s dominance has been compounded by its ubiquitousness as a result of the same business practices which the US government wants to put an end to. It is expected that the question of users’ choice will be one of the most debated issues throughout the proceedings.

​

Has Big Tech amassed a concentration of wealth? This tool, powered by Diplo’s Data Engine, compares the gross domestic product (GDP) of countries with the revenues of Big Tech.

​

Fiat money (i.e., a currency established as money by government regulation, monetary authority, or law) might soon be getting a fully digital form. Although initially seen sceptically, central bank digital currencies (CBDCs) are now moving into the realm of possibility, as central banks are looking at the conditions under which they could issue such digital currencies. 

Principles and features of CBDCs

ECB, the Bank of Japan, Sveriges Riksbank, the Swiss National Bank, the Bank of England, the Board of Governors of the US Federal Reserve, and BIS has been looking into the possibility of offering a ‘general purpose’ CBDC to the public – a digital currency that would have a guaranteed exchange rate against fiat currency. Aware that financial systems need to adapt to the way digital technology is changing our lives, the working group has been focusing on making sure that the use of money is convenient, especially taking into account ongoing digital developments (accelerated by the COVID-19 pandemic). 

On 9 October, the group issued a report which notes that central banks have plenty of reasons to accelerate their research and experimentation related to CBDCs. To start with, a robust CBDC could be a key instrument to assist central banks in delivering their public policy objectives. It could help expand the utility of central bank money, while also promoting more resilient, inclusive, and innovative payments. The report stresses that this innovative form of money should not compromise monetary or financial stability and would need to be complementary to the existing forms of money.

​

Complementarity of CBDCs and fiat currency. Source: bankinghub.eu

With this report, the BIS and central banks have moved from ‘thinking about the creation of CBDCs’ to building a blueprint on how to do it; this means that practical developments can be expected soon. 

Decisions on the implementation and design of CBDCs will remain a matter of national sovereignty for each jurisdiction. None of the banks involved in the working group has decided on CBDC adoption (yet). But acknowledging that CBDCs could be an important tool for central banks to meet public policy objectives is an important step forward.

The report lays out several foundation principles on which central banks should build their digital currencies:

• CBDCs should not hamper central banks from delivering their mandates related to ensuring monetary and financial stability.
• States should create diverse ecosystems in which CBDCs could coexist with existing forms of money (such as cash). 
• Public and private actors in the payment system should promote innovation and efficiency.  

Also outlined in the report are the technological building blocks needed for the development of CBDCs, to ensure that these are secure, resilient, scalable, and interoperable. Last, but not least, such currencies should rely on clear and robust legal frameworks and comply with appropriate regulatory standards.  

Regulatory issues are highlighted in the report as a main focus for future actions. Ensuring privacy and data protection for CBDCs users (and striking a balance with the need to devise mechanisms to reduce illegal activity) is recognised as a topic for particular review. Another major challenge is the protection of states' monetary sovereignty. Adoption of money not denominated in the sovereign currency could affect the impact of monetary policy for any country. This is why cross-border payments and stablecoins are considered several times in the report.

In terms of next steps, the seven central banks are committed to further exploration of the practical implications of CBDCs, including in terms of interoperability. In addition, the BIS has committed resources from its innovation hubs around the world to support this work. 

Time for a digital euro?

The ECB, part of the BIS-coordinated working group, has carried out separate work on the possibility of issuing a digital euro, through a dedicated High-Level Task Force. This work was presented in a report launched on 2 October, outlining several arguments in favour of a digital euro, such as supporting the digitalisation of the European economy and the strategic independence of the EU, pre-empting uptake of foreign currencies, avoiding risks of unregulated payment solutions, and complementing existing forms of money. A digital euro would need to be carefully designed to prevent possible negative implications, and be built on a solid legal framework. 

It is interesting to note that the ECB sees a digital euro not only as a driver of innovation and increased efficiency in the Eurosystem, but also as a contributor to the EU’s strategic autonomy, in line with the EU’s recent push towards enhanced digital sovereignty. 

A decision on whether to move forward with a digital euro project (which would start with an investigation phase) is expected to be made in mid-2021.

CBDCs elsewhere

The seven central banks involved in the BIS working group are not the only ones researching the options of introducing CBDCs. Below are some other examples.

China’s programme on CBDCs is in a full testing phase in major Chinese cities. China initially announced plans to officially launch a digital version of its currency in March 2020, but the launch has been postponed. Chinese media explain that this is due to the country's commitment to stay in the global payment system, awaiting global regulations or recommendations in this field.  

The Bank of Russia is also considering the possibility of issuing a CBDC (‘digital ruble’), as a way to ensure the availability of advanced payment systems required by the increasingly digitalised economy.

The Bank of Canada has an ongoing project which, according to its governor, has passed the experimental phase and is closer to a launchable product (although the country does not consider there is an immediate need for a CBDC).

Implications of CBDCs

Moving towards CBDCs solidifies the digitalisation of the banking sector and the trends of moving more towards digital payments in general. The introduction of CBDCs can make financial services and systems more inclusive and convenient. It potentially strengthens the role of the central banks. An open question remains regarding the impact of this development on banks' revenues because participants in the traditional payment systems (clearinghouses, settlement institutions, banks, ATMs, etc.) will have a smaller role to play.

The COVID-19 crisis has pushed several discussions, negotiations, and processes online; in other cases, meetings have been postponed. Geneva-based organisations have adjusted quickly to the new online reality. The global focus on health and humanitarian issues has increased the relevance of Geneva dynamics for global governance. The following updates cover the main discussions of the past month. For event reports, visit the Past Events section on the Digital Watch observatory.

Navigating Geneva’s Digital Policy Scene | 8 October 2020

Prof. Jovan Kurbalija, Head of the Geneva Internet Platform (GIP); Ambassador Jürg Lauber, Permanent Representative of Switzerland to the UN in Geneva; and Philippe Metzger, General Secretary and CEO of the International  Organization for Standardization (ISO) welcomed newly appointed ambassadors to the United Nations Office in Geneva. The event presented the digital policy scene of International Geneva, focusing on its main actors and current processes. In particular, the ambassadors were briefed on the increasing importance of standardisation discussions within Internet governance processes. 

Using (big) data: Making Data User-friendly | 14 October 2020

The fourth dialogue of the Road to Bern via Geneva initiative discussed what type of cognitive, technical, and analytical skills are needed for the effective use and communication of big data. The discussion also considered how to make the rather abstract results of big data analysis more tangible through data visualisation and storytelling. Finally, speakers and participants discussed how big data could be used effectively for evidence-based policymaking, especially in developing countries. The event was organised by the Permanent Mission of Switzerland to the UN in Geneva and the GIP and co-hosted by the World Economic Forum (WEF) and the ITU. Read our report from the sessions. 

Cross-sectoral Digital Cooperation: How the international Geneva Ecosystem Can Bring its Contribution towards an Enhanced Data Integration to Better Achieve SDGs | 19 October 2020

Organised in the context of 2020 Virtual UN World Data Forum, the event brought together Geneva-based international organisations to discuss their needs and challenges related to data and data policies and their contributions to ensuring that data is better integrated into various actions aimed at achieving the sustainable development goals (SDGs). The event also included a presentation of the outcomes of the four cross-sectoral dialogues on the collection, protection, sharing, and communication of data that have been taking place in Geneva since the start of 2020, in the framework of the Road to Bern via the Geneva Dialogues. The Data Sandbox, a pilot project developed for the Road to Bern Dialogues, was presented. It aims to better understand data which involves countries from around the world by comparing data sets in space and time to find patterns and deviations from patterns. Read our report from the sessions.

Right On Web Chat | 28 October 2020

The Right On initiative continued its series of web chats with a discussion on ‘Human rights and the precarious condition of electoral democracy’. The event looked at relations between free and fair democratic elections and the enjoyment and human rights, and explored existing challenges faced nowadays by electoral processes. Misinformation/disinformation and election security were underlined as some of the major challenges which need to be addressed through strengthened cooperation between multiple stakeholders (e.g. social media platforms, civil society organisations, and public institutions). The event recording and summary will soon be available on the dedicated website.

Learn more about the upcoming digital policy events around the world, and use DeadlineR to remind you about important dates and deadlines.

This year, the IGF is celebrating its 15th anniversary between 2 and 17 November. The fully virtual meeting is held under the theme Internet for human resilience and solidarity and will feature over 250 sessions dedicated to various Internet and digital policy issues. 

Highlights for IGF 2020

• The IGF is continuing a practice introduced last year, focusing debates on four main themes: data, inclusion, trust (continuing from 2019), and environment (new theme in 2020). This is part of the overall effort to foster more focused, in-depth discussions. 
• Digital cooperation is a cross-cutting theme, building on the Roadmap for Digital Cooperation. Several debates are expected to be held on the role of the IGF in the Roadmap implementation and on the evolution towards the IGF Plus model.
• For the third consecutive year, the meeting will be opened by the UN Secretary-General António Guterres.
• A high-level leaders’ track, organised in cooperation with various UN agencies, will include five sessions looking at the role of digital technologies and public digital policies in times of uncertainty. 
• A parliamentary roundtable on building trust in the COVID-19 era will bring the IGF to the attention of parliamentarians around the world. This will build on last year’s main session dedicated to legislative processes.
• The Youth IGF Summit will run again this year, complemented by networking talks between Internet governance experts and youth. 
• There will also be several virtual opportunities for networking and engagement, through several informal and interactive networking breaks, and the traditional IGF village featuring organisations active in Internet and digital policy.

Just-in-time reporting

The GIP Digital Watch observatory and DiploFoundation will continue the practice of providing just-in-time reporting from IGF sessions.

Along with individual session reports we will provide regular briefs summarising the main highlights with topic analyses. A final report, published after the IGF meeting, will include a thematic summary. These will complement the dynamic updates offered through the Digital Watch observatory.

The reports and briefs will be available on dig.watch/event/igf2020.