Technology & Digital round-up: 17 February 2023

The legal part…

• Since the last Technology & Digital round-up we’ve seen a big focus on cryptocurrency regulation. HM Treasury is consulting until 30 April 2023 on the next phase of its future financial services regulatory regime for cryptoassets. The consultation focuses on exchange activities, custody activities and lending activities, which the government is intending to bring into the regulatory perimeter for financial services. There are also proposals on cross-cutting issues such as market abuse and cryptoasset issuance and disclosures. The call for evidence includes questions around sustainability.

• The Financial Conduct Authority warned all cryptoasset firms marketing to UK consumers that they will soon need to comply with the new UK financial promotions regime. This follows the government’s recently published policy statement confirming its approach. The FCA will publish final rules once the relevant legislation has been made, after which there will be a short implementation period of four months.

• And the House of Commons Library published a research briefing on cryptocurrency regulation ahead of a Westminster Hall debate.

• HM Treasury and the Bank of England are consulting until 7 June 2023 on a potential digital pound. A decision on whether to introduce one will be made around the middle of the decade and will largely be based on future developments in money and payments. The digital pound would be issued by the Bank of England and intended to be used by households and businesses for everyday payments in-store and online, rather than for savings. It would be accessed through digital wallets offered to consumers by the private sector through smartphones or smartcards.

• In a significant judgment, the Court of Appeal found it arguable that software developers who look after bitcoin owe fiduciary duties to the bitcoin owners. The claimant claims to be the owner of some very high value bitcoin. The private keys were likely stolen in a hack, leaving the owner unable to access the assets and move them to safety. The claimant argues that the defendant software developers control and run the relevant bitcoin networks and that they owe fiduciary duties which extend to implementing the necessary software patch to solve the claimant’s problem and safeguard the assets. The case now looks set to proceed to trial, addressing the key questions of whether such networks are in fact decentralised (as the developers argue) and the existence and extent of any fiduciary or other duties owed. Watch out for our upcoming briefing on the decision.

• The Information Commissioner’s Office published its Tech Horizons Report which looks at technologies emerging over the next two to five years. The ICO warns that the significant benefits they offer could be lost if people feel companies are misusing their data.

• The government is seeking views until 1 May 2023 on software resilience and security for businesses and organisations.

• The Competition and Markets Authority provisionally concluded that Microsoft’s $68.7 billion proposed deal to buy game developer and publisher Activision Blizzard – the largest acquisition Microsoft’s ever made – could result in higher prices, fewer choices, or less innovation for UK gamers. A final report is due by 26 April 2023.

• The Digital Regulation Cooperation Forum published an insight paper on the possible harms and benefits associated with Web3, and the regulatory considerations that may be relevant to Web3-related applications.

• The UK Jurisdiction Taskforce of Lawtech UK published a legal statement on digital securities. It concludes that “English law can accommodate digital bonds circulated on a public blockchain without custodians, and the on-chain transfer of digital equity securities, even if a fully decentralised blockchain cannot currently be used as a register of members”.

• Recent briefings since our last Technology & Digital round-up include: the common issues encountered with cloud services and how best to mitigate them; practical advice on data processing and the contract legal basis under GDPR; and the latest edition of our Logistics Horizon Scanner, featuring tech developments such as the introduction of autonomous vehicles.

…and in other news

• The Office of Financial Sanctions Implementation published new guidance on ransomware and financial sanctions.

• In what is believed to be a national first, the FCA worked in partnership with West Yorkshire Police to take action against unregistered crypto ATM operators in Leeds.

• The Biometrics and Surveillance Camera Commissioner warned that the monitoring of high-tech surveillance systems is not keeping up with technology, as his latest annual report was published.

• The National Cyber Security Centre published a blog post on its ‘NCSC for Startups’ initiative and why we need to take a whole-of-society, ecosystem-based approach to cyber security innovation.

• Yahoo and Dell are the latest tech companies to announce job cuts, following similar decisions by many of the Big Tech companies and others in the past few months alone.

• Interpol is working out how to police the metaverse, as it seeks to keep ahead of criminals who adapt very quickly to any new technological tools available.

• Microsoft has retired Internet Explorer, permanently disabling it through a Microsoft Edge update on most versions of Windows 10.

• The government published its response to the Business, Energy and Industrial Strategy Committee’s November 2022 report on the semiconductor industry in the UK. An inquiry examined the strengths and weaknesses of the industry and its supply chain in the UK. The Committee says it was expecting and hoping for something more substantive, as the government is yet to publish its Semiconductor Strategy.

• And finally, forget the space race – we’ve got an AI chatbot race on our hands. Google launched Bard, a rival to Microsoft’s hugely successful ChatGPT, only for the chatbot to send the shares in Alphabet, Google’s parent company, plummeting, after it gave the wrong answer in a promotional video. Watch this space.

If you have queries about any of the points covered in this edition of the Technology & Digital round-up, or need further advice or assistance, please get in touch with Sally, Luke or one of our Technology & Digital experts.

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