The New York State Department of Financial Services’ (NYSDFS) is currently considering regulations for virtual currencies (e.g. Bitcoin). While ITIF believes that the State of New York is likely the wrong entity to address these important policy issues, we have offered a number of recommendations should it continue to pursue these regulations. To strike the right balance that helps protect customers and root out illegal activity without stifling innovation or competition, New York should foster new entrants and budding virtual currencies without burdening their adoption with heavy-handed reporting requirements. Virtual currencies may be the next wave of innovation in our country’s financial services or they may be just a flash in the pan. Only time and a light regulatory touch will tell.
New York should ensure “BitLicenses” are a Step Forward for Innovation
New York State has proposed regulating virtual currency businesses. While ITIF believes the State of New York is likely the wrong entity to address these important policy issues, we have offered some recommendations for the BitLicensing framework. This blog accompanies our recommendations.
The LEADS Act Presents a Path Forward for Cross-border Digital Searches
Yesterday, Senators Hatch, Coons and Heller introduced the Law Enforcement Access to Data Stored Abroad (LEADS) Act which seeks to clarify the powers that warrants issued by the U.S. courts have on data stored abroad. If enacted, this law could have both immediate effects on a current court case, and far-reaching effects on international agreements for cross-border access to data for law enforcement purposes.
Beyond Internet Universalism: A Framework for Addressing Cross-Border Internet Policy
In 1995, Bavarian authorities raided the German offices of CompuServe and charged Felix Somm, the president of CompuServe’s German subsidiary, with violating the law because the company did not block access to certain websites, including some sites containing child pornography and Nazi propaganda. In response to these charges, CompuServe subsequently blocked access to two hundred online messaging boards for all four million of its customers worldwide, outraging many of its Internet users who were angry that German law could dictate what content was available to those outside its borders when other countries had more permissive laws about indecent and offensive content.
In 1998, a German court convicted Somm and gave him a suspended two-year sentence and a fine, but the ruling was overturned a year later. This case set off an international debate about the appropriateness of applying domestic laws to a global network—a debate which is even more heated, more important, and still unresolved to this day.
The Internet is a global network that is fundamental to commerce, communication, and culture. The ability to use the Internet to purchase products and services from halfway around the world, to talk to friends and strangers in other countries, and to share and discover new ideas, is what has made the Internet the defining technology of the 21st century. But the same capabilities that make the Internet the incredible powerhouse that contributes trillions of dollars annually to the global economy—the ability to transfer data seamlessly across geographic borders—has exacerbated the international conflicts that arise between nations with different laws and values.
Even though the importance of the Internet to the global economy and society continues to grow each day, collectively nations have made little substantive progress in creating a framework for resolving the many conflicts over Internet policy that inevitably occur between sovereign nations. These conflicts arise over a myriad of issues, such as free speech, intellectual property, privacy, cybercrime, consumer protection, taxation, commerce regulation, and others. To date, despite many attempts, no framework has been successful at providing a practical and widely-accepted model for policymakers to resolve cross-border Internet policy conflicts in ways that respect both the global nature of the Internet and national laws and norms.
One reason for the lack of progress is that different nations have different sets of values and priorities, and attempts at resolving policy disputes inevitably falter because the various parties lack a common basis for dialogue. Another reason is that many proposed frameworks tend to apply a particular nation’s worldview on the rest of the world, such as promoting democracy and freedom of expression (as in the case of the United States) or maintaining political control (as in the case of nations like China and Russia). But despite their appeal (e.g., they would be relatively easy to administer if everyone would just agree to one universal framework), such frameworks simply cannot work because nations have significantly different cultural values, policy priorities, and legal systems. It is highly unlikely Europe will agree to a U.S. privacy framework (or that the United States will agree to an EU privacy framework), or that Saudi Arabia will agree to U.S. free speech framework, especially when it comes to Internet pornography. But the alternative, a Balkanized, fragmented global Internet that gives nations the right to act on the Internet with impunity cannot be the answer either.
What is needed is a framework that allows nations the right to customize Internet policy to their own national needs and rules, while at the same time constraining those rights in ways that enable global Internet commerce and digital free trade while also preserving the underlying global Internet architecture, like the global domain name system. While nations will not always agree unanimously on specific policy proposals, appropriate solutions, or even the relevant evidence, a common framework of understanding cross-border Internet policy issues will allow for healthier Internet policy debates, better cooperation and coordination between nations, and fewer policy conflicts.
This report explores the nature of cross-border Internet policy conflicts and provides a sample of the types of conflicts that have been seen in recent years. It also discusses the limitations of existing Internet policy frameworks, offers an alternative perspective and outlines a specific set of rules that should be used for evaluating cross-border Internet policy conflicts. Finally, it operationalizes this framework using various examples to show the method in action.