Steve Wozniak, co-founder of Apple said it. Chris Hughes, co-founder of Facebook said it. The large data mining companies, should be paying us the users for the data we give them. Data is currently not private property. Our digital World hasn’t evolved to market economy. Data ownership is in fact currently feudal. Few corporations in the World can exercise profiteering from it, when users are subjected to serfdom.
Rule of law, the judicial branch of government to be exact, should be allowed to regulate the big data harvesting companies. Then civil liberties should be enforced, so that mobile users rights would be protected. Private data should be considered as private property. Free markets could then emerge allowing larger capital investments and innovation. Regulating just financial markets and considering just growth around blockchain is too feeble measure to tackle the entire problem.
Struggle for privacy and struggle to identify users have captured blockchain and financial technology development overall. Should the movement, which started with instant mobile money transfers be allowed to exist by decentralised system of contracts, leading to transactions. Or are we able to continue with centralised banking systems regulated nationally and with international agreements. Nobody wants to support a system, which enables drug lords or terrorist organisations transact anonymously. We don’t want to encourage digital tax heavens, nor enable dark web child pornography. Democratic processes, such as elections, should be freed from fake news and other illegal influence by social media. Not even Russian oligarchs would want to live without rule of law. Yet, Bitcoin transaction parties remain unidentifiable and breaches to personal data are commonplace.
Currently some cryptocurrency exchanges have been converted to identify their users and in this way the industry is trying to reach regulatory compliancy. Similarly, there are private add-ons that users can have to identify themselves to transact, but these are all voluntary. Structural regulatory solutions are still lagging and the political will is yet to be identified. The matter is about the profiles and the level of identification attached to them.
The push is to save cryptos and make them part of mainstream banking and international regulatory framework. Countering forces are there as well. Massive amounts of money enjoy operating in the dark and are willing to sponsor cyber-attacks on those who want to create solutions to make crypto transactions come to light. The battle lines are drawn. It’s a war on identification. The crypto is in the forefront, but herein lies the problem of private ownership of data as well. If one is not allowed to keep it private, it’s hard to insist on ownership.
But let’s look at the issue from broader perspective. Maybe the chain overall is one day going to become regulated and then the problem of unidentified money transactions is going to be solved.
Our banking system and therefore our governments are based on person’s national identity. The country of your birth identifies you the moment you’re born with birth certificate, digital or otherwise and you become a citizen. You get an identity number and the right to a passport. Moreover, this national identification gives you a set of rights and responsibilities as you grow older and become of legal age. You get a bank account, where you can put your salary, transact and pay your taxes. The government insists on transparency on your transactions to ensure there’s no tax avoidance. Pensions and credit systems are built on top of this. Most of us may not be aware, but we all already have a credit rating.
The modern version of this identification means, that you need your digital profile identified before making a mobile bank transaction or register to vote. With this, there is a rapid transition from national identification to corporate identification. Nation states easily outsource core functions of government to the markets, but when doing so they are mostly unaware of how is this ultimately going to play out.
It’s easily forgotten that the functions are built on the pillars of freedoms, like the freedom of owning private property and right to privacy; judicial system, free markets, civil society and competitive electorate. Like the civil liberties movements from India to America or South Africa have argued, citizenship rights should not only be ensured in law, but also in practice. What’s crucial therefore is to see the direction of where our market economy, governments and democracies are going with the digital transformation. Are they able to ensure civil liberties and citizens rights also in practice.
When discussing the existing disruption to the markets by big data and new financial technologies, this discussion on civil liberties becomes even more urgent. We may blame the populist day-to-day politics to its faults on the surface, but urgent attention should be paid on how to rectify the situation where the democratic fundamentals are under siege. We should all take measures to bolster the institutions our societies stand on and ensure our markets work freely and effectively. Democracies are built on citizenship and identification, free flow of information, competitive political system and freedoms ensured by the rule of law.
Regulators and democratic governments must therefore become aware of four main functions of government currently crumbling:
- 1. The Rule of Law.
- Data derived from every individual on this planet is being harvested by only few extremely powerful companies and even lesser number of governments, which have the capacity to crunch it. It is unsustainable and leads to excessive risk for manipulation.
We must therefore make certain, that no one is above the law locally or internationally. We must ensure that our judicial systems reign supreme, our international agreements are in place and effective. Moreover, we must ensure individual civil liberties, like freedom to privacy and private property, are protected. And therefore we must insist, that data is private property just as much as land is.
- 2. Monopoly on National Identification.
- Governments based on well-functioning institutions of democracy, must remain with monopoly on (national) identification. National identity cannot be outsourced to private companies, nor private companies be allowed to replace national identities with their own digital identification and/or profile.
Both our democracy and competitive markets, without monopolies or cartels, are built on the rule of law, the regulation of markets and therefore the monopoly of national identification. Breaking that monopoly, the authority to regulate, would lead to oligarchic societal structures and ultimately feudalism.
- 3. Right to Privacy.
- Nation states must ensure their citizens right to privacy. The European Union passed the General Data Protection Regulation (GDPR) directive, but it leaves gaping holes for the mobile operation systems and the like to exploit. Moreover, it’s policing is desperately underpowered and uneducated, and its jurisdiction is questionable. The rest of the World simply does not comply, leaving therefore EU citizens vulnerable.
As an example: I am EU member state citizen, currently residing in the EU, but my most common form of digital identification is done by a foreign private bank, my telecom profiles are in three different countries, two of which are outside the EU, I transact in cryptocurrencies, which know no political jurisdiction and my social media and Uber profile are South African. I could easily also get an e-residence profile to myself from Estonia for my corporate accounts. Avoiding citizenship responsibilities has simply become too easy, because replacing national identification can be done on a whim.
- 4. Compliance to the Democratically Elected Governments and Therefore the Rules of the Free Markets.
- Big data companies and cryptocurrencies must comply with national authorities first and therefore submit to regulation, which ensures free and functioning markets. If this cannot be achieved, the result will be erosion of not only central banking systems, but systems of national identification and therefore democratic governance, as discussed above. The next step of erosion will be the market based banking systems all-inclusive and then free markets, because common rules can no longer be adhered. What’s clouded as FinTech disruption of centralised banking systems is in fact erosion of rights and responsibilities as citizens to transact in our democratically governed central bank and its select currency.
Large and powerful autocratic dictatorships may find (unidentifiable) cryptocurrencies as an attractive tool to advance their sphere of influence and therefore foreign policy leverage, but disrupting our democratic governance and the power to regulate, is not in the interest of citizens of a democratic nation.
Cecil John Rhodes once dreamed of colonizing the entire World under the British Empire, which in his mind would lead to freedom of movement to all citizens, unified labor markets and ultimately to World peace. He didn’t however consider the slaves to be citizens and this is the problem similar to what we’re facing today.
Who and in which way do we identify a person with rights and civil liberties?
Just few years later after Rhodes ideas were shared, the communist revolutionsought to deliver similar utopian World. Both schools of thought strongly believed in totalitarian solutions and expected technological innovations resolve peoples’ welfare. Such thoughts have long rendered themselves useless. We rather sought to take the long and hard road building the institutions to ensure our freedoms and democracy, and therefore also competitive markets.
Just few years later after Rhodes ideas were shared, the communist revolutionsought to deliver similar utopian World. Both schools of thought strongly believed in totalitarian solutions and expected technological innovations resolve peoples’ welfare. Such thoughts have long rendered themselves useless. We rather sought to take the long and hard road building the institutions to ensure our freedoms and democracy, and therefore also competitive markets.
Yet now we seem to be allowing another technocratic utopian model with our never-ending faith on technological solutions to societal problems. Today your data is not yours to use as you please, but it’s harvested by the few and auctioned off without your knowledge or consent. Evidently the most powerful governments have started a battle to check the power of the biggest data mining companies like Google, Apple, Facebook or Amazon (the GAFA). All these efforts seem not only futile, but feudal.
The feudal reference is closer than you think. The monarch (the state) reprimands the nobility (GAFA) for their excess land use (data use) and burdening too heavy taxes (data sales) on the people. Thereby altering the balance of power between the ruler and the noblemen also in politics (the Facebook hearings). Taxes so heavy on peasants (the mobile users) seem like serfdom to the citizens and that is of course worrisome to the state with monopoly on the auxiliaries and responsibility for public order and safety.
When these discussions were held, Feudalism had started its long but natural process to end. No one in the middle-ages had thought of private land ownership, even post Magna Carta, but ultimately market economy emerged. The laws on private property were established and therefore market economy and the first industrial revolution were enabled.
Yes, I’ve also heard that Mark Zuckerberg once envisioned Facebook passport to its growing number of 2 billion users. The story doesn’t tell, whether he believed it to bring about World peace under one solution as well.
We should be discussing how crucial it is to our livelihood, that we own and control our digital identities and the data derived and sold from it. Like in the Battle of Barons in 1217, now the struggle is between the state and the World’s largest private companies.
We should take care of our civil liberties and enable market economy and the next industrial revolution.
(First published at Medium 6/2018)
