London Politica & Warwick Think Tank: The Social Face of Spyware Report
Following the recent heated battle for a TikTok ban in U.S Congress earlier this month, the words ‘TikTok’, ‘China’ and ‘Spyware’ have taken the internet by storm. In this new report, titled The Social Face of Spyware, we examine the ways in which the revolutionary social interface of TikTok may contain deeper interwoven systems of data collection, user tracking and surveillance tools that make it a substantial political threat. Through our series of articles, analysts from both London Politica and Warwick Think Tank delved into the ways in which TikTok has influenced propaganda and misinformation, whether it can be used as a means of surveillance, how it compares to long- standing privacy regulations and what implications this has for the wider international landscape.
What the UK’s Online Safety Bill could mean for tech companies.
Britain’s Online Safety Bill, which is currently in the committee stage in the House of Lords, has been the subject of significant controversy. Having undergone numerous revisions and adaptations thus far. It appears the bill is finally near completion and implementation, and it will likely have a large impact on tech companies operating in the UK. With the potential to alter the relationship between big tech and government,the bill which aims to make the internet a safer place, will give OFCOM new powers to enforce how tech companies operate online. In particular, the bill aims to ensure user-to-user service providers tackle illegal content and protect children.
A significant element of the bill, which is being considered, is the implementation of criminal liability for senior managers at social media companies who fail to uphold their duties in child safety. Michelle Donelan, Secretary of State for Digital, Culture, Media and Sport, stated that the measures will be largely modeled upon the Irish Online Safety and Media Regulation Act. It will focus on individual responsibility for managers, which could see some managers could face fines and imprisonment, after they fail to comply with warnings from OFCOM.
This amendment has come under fire from free speech campaign groups because there are concerns that tech companies may inadvertently remove perfectly legal content to avoid any potential repercussions that may be deemed harmful by OFCOM. Article 19, a freedom of expression NGO, argues that the child protection responsibilities in the bill have vague concepts and definitions, making it challenging for tech companies to fully understand what content should be enforced. Social media companies are already at the centre of the debate surrounding freedom of expression versus internet safety, and the Online Safety Bill will likely exacerbate this issue for social media firms.
This is likely going to be most noticeable with Twitter, whereby one of the reasons Elon Musk acquired the company was to ‘preserve free speech’, therefore, the Online Safety Bill will likely present a new set of challenges for how Twitter should regulate content on their services, with polling suggesting 24% of people think freedom of speech is more important than freedom from abuse. Writing in a recent article for The Independent, a former Twitter employee suggested that “Twitter’s new management may find itself stuck between an obligation to the responsibilities imposed by the new laws it cannot keep; and a penalty (the fines or sentences for imposed for not adhering to tech regulations) it cannot afford.”. However, Elon Musk and Twitter have already shown that they are willing to cooperate with individual nations' internet regulations, as seen with Twitter blocking a BBC documentary in India that was critical of Prime Minister Narendra Modi.
Furthermore, the bill includes a category of ‘primary priority content that is harmful to children’. This category of content is to be entirely prevented from reaching children, with the bill stating that tech companies should “use proportionate measures to effectively mitigate and manage the risks of harm”. In this instance, the bill does not direct what specifically should be implemented, which arguably leaves a large amount of flexibility for tech companies to ensure the measures don’t hugely interfere with how their services are already run. Moreover, it is the Culture Secretary, not parliament, that can determine what content falls under this remit. A House of Lords committee has argued that this provision hands the Culture Secretary too much power which is “needlessly expansive” in directing what content online should be enforceable, so it is possible that this could be amended. The bill is currently focussed on protecting children from content that encourages activities such as self-harm, and eating disorders.
Another key measure is that services that publish pornographic content will have to actively prevent minors from viewing such content. However, the bill does not detail what specific measures should be taken to prevent minors from viewing harmful content, and it appears that the method of doing so is largely up to the companies themselves. It is possible that tech companies may approach the issue by introducing age verification measures, similar to that of gambling sites whereby users must upload their ID to prove their age. 43 MP’s have written to the Culture Secretary calling for more strict age verification measures to be written into the bill rather than it being left up to the tech companies, so it is possible that the age validation measures previously scrapped from the 2017 Digital Economy Act may make a comeback in the near future.
Overall, Britain’s Online Safety Bill will have a significant effect on the future of social media firms and the wider tech space. For the bill to work successfully and not be undermined, it is essential that the measures in the bill do not go beyond their original remit, and that tech companies will have to face the challenge of ensuring they are precise, accurate, and transparent in what content gets enforced. The bill may also undergo various revisions, and it will be interesting to see how it is implemented upon completion. Watch this space!
Who watches the UK Fintech Industry?
London continues to be ranked as one of the most ‘fintech-friendly’ cities in the world and, as such, a broad spectrum of fintech businesses at various stages of growth and development are represented in the United Kingdom (UK). There are currently over 2,500 FinTech companies in the UK, a figure which is expected to at least double within the next 10 years. It has been estimated that half the UK’s small businesses and over four million consumers use services powered by Open Banking technology.
There are currently no prohibitions or restrictions that are specific to fintech businesses in the UK, and depending on the nature of the business, fintech is regulated in the same way as other traditional financial services firms. However, the fintech industry has been subject to the proverbial problem of too many cooks. Presently this sector is regulated by several agencies in the UK. The Financial Conduct Authority (FCA) is responsible for most regulated activities and services that a fintech would provide.
The Prudential Regulation Authority (PRA) covers the prudential regulation of banks and insurers in conjunction with the FCA. The Payment Services Regulator (PSR) looks at the payment systems and the financial institutions that participate in them. HM Revenue and Customs (HMRC) and the Information Commissioner’s Office also play a role in this space.
This is not all, as more government departments are looking to get involved. The Bank of England and HM Treasury have recently set up a task force to scope out the viability of a UK central bank digital currency, and in April 2022, the government announced plans for stablecoins to be recognised as a valid form of payment. As crypto assets technology and investment is a growing area within fintech, the UK aims to make it a global hub for crypto assets technology and investment.
Upcoming Areas of Regulation
The FCA’s Director of Strategy and Competition, Chris Woolard, stated that regulation has a role to play in creating an environment to encourage innovation and competition.
After regulations passed in 2011 (Electronic Money Regulations 2011) and 2017 (Payment Services Regulations 2017), payment services and e-money are separately regulated. However, as previously mentioned, the government is in the process of introducing a new set of policies relating to the custody of stablecoin as part of its approach to establishing a bespoke regulatory framework for this type of digital asset.
Another new regulatory requirement within this sector would be Consumer Duty which is expected to be implemented by 30 April 2023. It is driven by the FCA and aims to set higher expectations of firms in order to have confidence in financial markets and future gains from innovation’. The Consumer Duty will require firms to review all financial products and services in the UK that are aimed at retail customers.
Another important fintech product that will be under the scanner is Buy-Now Pay-Later credit agreements which allow people to spread the full cost of a purchase over time.
In June 2022, the UK government announced proposals to bring unregulated BNPL products within the Consumer Credit Act 1974 (CCA) to protect customers.
Additionally, there are also EU initiatives on the horizon, including MiCAR, covering the crypto asset market, and the EU Retail Payments Strategy, which is expected to lead to a greater supervisory focus on the sector as a whole and may impact the UK market as well.