European Union officials have voted in favor of stricter regulations on artificial intelligence, including a ban on AI use in biometric surveillance and a requirement for AI systems like OpenAI's ChatGPT to disclose when content is generated by AI. Ars Technica reports: On Wednesday, European Union officials voted to implement stricter proposed regulations concerning AI, according to Reuters. The updated draft of the "AI Act" law includes a ban on the use of AI in biometric surveillance and requires systems like OpenAI's ChatGPT to reveal when content has been generated by AI. While the draft is still non-binding, it gives a strong indication of how EU regulators are thinking about AI. The new changes to the European Commission's proposed law -- which have not yet been finalized -- intend to shield EU citizens from potential threats linked to machine learning technology.

The new draft of the AI Act includes a provision that would ban companies from scraping biometric data (such as user photos) from social media for facial recognition training purposes. News of firms like Clearview AI using this practice to create facial recognition systems drew severe criticism from privacy advocates in 2020. However, Reuters reports that this rule might be a source of contention with some EU countries who oppose a blanket ban on AI in biometric surveillance. The new EU draft also imposes disclosure and transparency measures on generative AI. Image synthesis services like Midjourney would be required to disclose AI-generated content to help people identify synthesized images. The bill would also require that generative AI companies provide summaries of copyrighted material scraped and utilized in the training of each system. While the publishing industry backs this proposal, according to The New York Times, tech developers argue against its technical feasibility.

Additionally, creators of generative AI systems would be required to implement safeguards to prevent the generation of illegal content, and companies working on "high-risk applications" must assess their potential impact on fundamental rights and the environment. The current draft of the EU law designates AI systems that could influence voters and elections as "high-risk." It also classifies systems used by social media platforms with over 45 million users under the same category, thus encompassing platforms like Meta and Twitter. [...] Experts say that after considerable debate over the new rules among EU member nations, a final version of the AI Act isn't expected until later this year.

More than half the public would like to see a ban on gambling advertising, according to a new poll taken as ministers prepare to unveil an overhaul of the industry. In the survey, carried out for the charity Gambling with Lives, 52% of respondents said they supported a ban on all gambling advertising, promotion and sponsorship, and nearly two-thirds wanted new limits on online stakes. From a report: Ministers are expected to reject a blanket ban on gambling advertising in a white paper that could be published this week. The Premier League recently announced that its clubs would end shirt sponsorship by gambling firms by the end of the 2025/26 season.

Will Prochaska of Gambling with Lives, which supports families bereaved by gambling-related suicide, said: "This poll displays the strength of public sentiment on gambling advertising. The Premier League's decision to remove ads from shirts but leave them all over stadiums and across broadcasts, is a cynical attempt to avoid regulation. This data shows the public won't be tricked into thinking it's enough. If gambling reforms fail to significantly restrict gambling advertising, they'll be woefully out of step with a public that expects action." The Survation poll of 1,009 adults found that 68% of respondents thought under-18s should not be exposed to gambling advertising, 64% supported affordability checks for those wanting to bet more than $124 a month, and 60% saw gambling as a danger to family life.

Coinbase has been granted a license by the Bermuda Monetary Authority, allowing the US crypto exchange to operate as a digital asset business there. The exchange is also in the process of obtaining a license in Abu Dhabi. Reuters reports: Coinbase CEO Brian Armstrong said on Tuesday that crypto firms will develop in "offshore" havens unless the U.S. and UK create "clarity about regulation" for crypto. Coinbase is planning to launch a crypto derivatives exchange in Bermuda as soon as next week, Fortune reported on Wednesday, citing a person close to the company.

U.S. SEC Chair Gary Gensler told lawmakers on Tuesday that he had "never seen a field that's so non-complying with laws." Crypto firms say they need clarity about regulations, but Gensler has said that crypto markets "suffer from a lack of regulatory compliance, not a lack of regulatory clarity."

Binance CEO Changpeng Zhao suggested crypto entrepreneurs might need to move to a country more favorable to cryptocurrencies and digital assets amid what appears to be a growing crackdown by U.S. regulators on the industry. From a report: "If you're serious about your project, moving to a new country may not be a bad thing," he said in a Twitter Spaces talk, citing Dubai, Bahrain and France among those places with more welcoming regulation. The comments come on the heels of the New York Department of Financial Services' move to stop Binance partner Paxos from issuing the BUSD stablecoin. Last week, the Securities and Exchange Commission ordered the Kraken exchange to stop offering staking services. "Most regulators at least claim they welcome people to talk to them, but I'm not sure how much access they really do give to people, especially entrepreneur, new projects without reputation," he said, adding that big firms like Binance do have access.

An anonymous reader quotes a report from MIT News: What if the U.S. placed a tax on robots? The concept has been publicly discussed by policy analysts, scholars, and Bill Gates (who favors the notion). Because robots can replace jobs, the idea goes, a stiff tax on them would give firms incentive to help retain workers, while also compensating for a dropoff in payroll taxes when robots are used. Thus far, South Korea has reduced incentives for firms to deploy robots; European Union policymakers, on the other hand, considered a robot tax but did not enact it. Now a study by MIT economists scrutinizes the existing evidence and suggests the optimal policy in this situation would indeed include a tax on robots, but only a modest one. The same applies to taxes on foreign trade that would also reduce U.S. jobs, the research finds.

"Our finding suggests that taxes on either robots or imported goods should be pretty small," says Arnaud Costinot, an MIT economist, and co-author of a published paper detailing the findings. "Although robots have an effect on income inequality ... they still lead to optimal taxes that are modest." Specifically, the study finds that a tax on robots should range from 1 percent to 3.7 percent of their value, while trade taxes would be from 0.03 percent to 0.11 percent, given current U.S. income taxes. "We came in to this not knowing what would happen," says Ivan Werning, an MIT economist and the other co-author of the study. "We had all the potential ingredients for this to be a big tax, so that by stopping technology or trade you would have less inequality, but ... for now, we find a tax in the one-digit range, and for trade, even smaller taxes."

[...] Apart from its bottom-line tax numbers, the study contains some additional conclusions about technology and income trends. Perhaps counterintuitively, the research concludes that after many more robots are added to the economy, the impact that each additional robot has on wages may actually decline. At a future point, robot taxes could then be reduced even further. "You could have a situation where we deeply care about redistribution, we have more robots, we have more trade, but taxes are actually going down," Costinot says. If the economy is relatively saturated with robots, he adds, "That marginal robot you are getting in the economy matters less and less for inequality." The paper, "Robots, Trade, and Luddism: A Sufficient Statistic Approach to Optimal Technology Regulation," appears in advance online form in The Review of Economic Studies.

The EU executive wants to ban mini-shampoo bottles in hotels and the use of throwaway cups in cafes and restaurants, as part of sweeping legal proposals to curb Europe's mountains of waste. The Guardian reports: A draft EU regulation published on Wednesday also proposes mandatory deposit and return schemes for single-use plastic drinks bottles and metal cans, as well as an end to e-commerce firms wrapping small items in huge boxes. The new rules, which will have to be approved by EU member states and the European parliament, are intended to tackle the surge in plastic and other packaging waste. EU officials estimate that 40% of new plastics and 50% of paper are used in packaging, making the sector a vast consumer of virgin materials.

The EU passed a law in 2019 to ban the most common single-use plastic items, such as plastic cutlery, stirrers and straws, but officials want to go further to tackle soaring amounts of packaging rubbish. The average European is thought to generate 180kg of packaging waste each year, which could rise by 19% by 2030, without action. Under the latest proposals, EU member states would have to reduce packaging waste per capita by 15% by 2040 compared with 2018. Officials think this could be achieved by more reuse and refilling, as well as tighter controls on packaging. For example, e-commerce retailers would have to ensure that empty space in a box is a maximum 40% in relation to the product.

The commission also hopes to end confusion about recycling: it proposes harmonized labels, probably pictograms, to make it clear to consumers which bin to use. In a separate law, the commission seeks to ensure that products claiming to be "biobased," "biodegradable" or "compostable" meet minimum standards. In an attempt to clamp down on greenwashing, consumers would be able to tell how long it takes an item to biodegrade, how much biomass was used in its production and whether it is really suitable for home composting.

Meta Platforms was slapped with a $277 million fine for failing to prevent the leak of the personal data of more than half a billion users of its Facebook service. From a report: The Irish Data Protection Commission, the main privacy watchdog for Meta in the European Union, levied the fine following a probe that found the social-media company had failed to apply strict safeguards required under the bloc's sweeping General Data Protection Regulation.

On top of the fine -- the third-biggest under GDPR -- the watchdog ordered Meta's Irish unit to make sure its processing complies with the law, according to an emailed statement on Monday. The Irish authority is the lead watchdog for some of Silicon Valley's biggest tech firms that have set up an EU base in the country, including Meta. It opened its probe following revelations that "a collated dataset of Facebook personal data" had been published on the internet. Personal information on 533 million Facebook users worldwide reemerged on a hacker website last year, including their phone numbers and email addresses.

Gizmodo points out that the United Kingdom's next prime minister, Rishi Sunak, "is a certified Crypto Bro who once requested that the Royal Mint issue an NFT." From the report: During his tenure as finance minister under former PM Boris Johnson, Sunak was in charge of advancing a number of crypto-related initiatives that sought to normalize digital currencies and integrate them into the British economy. By all accounts, he is the first crypto enthusiast to serve in the UK's top office. He's also the first person of color and the youngest PM -- 42 years old -- that Britain's had in 200 years. To be fair, Sunak's efforts at crypto promotion have at least trended towards regulation and taxation as opposed to total laissez faire deregulated madness -- though those efforts could, ultimately, simply normalize a phenomenon that critics say is redundant at best and a privacy hazard at worst. In April, Sunak announced a series of programs to turn the UK into what he called a "global cryptoasset technology hub." Among the initiatives announced at the time was a plan to integrate stablecoins into the national payment system, thus "paving their way for use in the UK as a recognized form of payment." Considered to be the least volatile form of cryptocurrency, stablecoins have seen more interest by governments than other forms of crypto -- though projects like Terra and Tether have shown the potential danger in putting too much faith in the assets' stability.

Sunak's plans also suggested creating additional regulations that would've helped further incorporate crypto into the UK's economic and legal framework, thus spurring greater investment in the space. "The measures we've outlined today will help to ensure firms can invest, innovate and scale up in this country," Sunak wrote in a press release published at the time. Another ambitious initiative pushed by Sunak was the Financial Services and Markets Bill, a piece of legislation that would give local governments in Britain broad discretion to regulate cryptocurrencies, thus further assimilating them into the nation's economy. The bill, which has not yet passed, is currently being looked at by Parliament.

At the same time, Sunak also recently backed a study to look at the potential benefits of creating a central bank digital currency (CBDC), or "Britcoin" as he dubbed it. Proponents of CBDCs argue that they could have benefits for spenders, making payments "faster, cheaper, and more secure," as one op-ed puts it. However, critics argue that they are unnecessary and could ultimately spell huge privacy troubles, given the trackable nature of crypto and digital currencies. Despite his crypto track record, analysts have suggested that is is unlikely Sunak will have time to focus much on any web3-related initiatives in the near term. Given Britain's current economic dumpster fire, any work on "Britcoin" might have to take a backseat.

The US Consumer Financial Protection Bureau released a sweeping report warning that the burgeoning "buy now, pay later" industry needs fresh regulation to address industry practices. From a report: CFPB Director Rohit Chopra said he's ordered staff to identify surveillance policies in the industry that need to be curtailed, including the collection of consumers' purchase and demographic data for targeted ads. Buy-now, pay-later providers will also have to undergo supervisory examinations similar to those applied to credit-card companies. "It might involve some new rules, some new guidance -- and more to come on that," Chopra said in an interview on Bloomberg Television's "Balance of Power With David Westin" after the report was released, adding that he asked CFPB staff to come up with a range of options to make sure there is fair competition between buy-now, pay-later firms and the credit-card companies.

"We want to make sure to take steps to prevent harm before it spreads." The proposals would mark the most extensive regulations yet to hit the sector, which has exploded in popularity in recent years by offering consumers ways to split purchases into smaller installments, often without charging interest. Instead, providers make most of their money by charging merchants a fee each time a consumer uses the product at checkout.

An anonymous reader quotes a report from The Economist: America is home to the heftiest interchange fees of any major economy -- costs are an order of magnitude greater than in Europe and China. That largely benefits two firms: Visa and Mastercard, which facilitate more than three-quarters of the country's credit-card transactions. Doing so has made them two of the most profitable companies in the world, with net margins last year of 51% and 46% respectively. Rank every firm (excluding real-estate-investment trusts) in the s&p 500 index by their average net-profit margins last year, five years ago and a decade ago, and only four appear in the top 20 every time. Two are financial-information firms, Intercontinental Exchange and the cme Group. The others are Mastercard and Visa. At first glance their position appears insurmountable. Already dominant, in recent years the firms have been boosted by a covid-induced rise in online shopping. American consumers used credit or debit cards for 45% of their transactions in 2016; by 2021, that had reached 57%. The migration from cash is "a significant and long-running tailwind," says Craig Vosburg of Mastercard. Yet two threats loom. The first comes from Washington, where legislators hope to smash the duo's grip on payments. The second is virtual. Payments have been transformed in Brazil, China and Indonesia by cheap, convenient app-based options from tech giants like Mercado Pago, Ant Group, Tencent and Grab. After a long wait, new entrants now look like they could shake up America's market.

[...] On July 28th Richard Durbin, the same Democratic senator who regulated debit interchange a decade ago, introduced the Credit Card Competition Act (ccc). It does not propose a cap on interchange, as the debit rule does, since costs for credit cards are more variable than for debit cards, making it harder to find the right level. Instead, the ccc would attempt to spur competition by breaking the links between card networks and banks. At present, when a bank issues a credit card every transaction on it is processed by the card network the bank stipulates, meaning the bank is guaranteed the interchange fee the network sets. If the ccc becomes law it will force banks to offer merchants the choice of at least two different card networks. Crucially, these choices could not be the two biggest -- at least one smaller network would have to be offered. They could compete for business by offering lower interchange rates, and merchants would presumably jump at the offer.

Two factors help the bill's chances. It is sponsored by Mr Durbin, the second-most senior Democrat in the Senate, and it is bipartisan, co-sponsored by Roger Marshall, a Republican from Kansas. The ccc's best chance is probably as an amendment to another bigger piece of legislation, which is how debit-card regulation passed in 2010. Even if the effort fails, or fails to work as intended, a potentially bigger threat to the giants looms. So far new entrants to the payments market have benefited Visa and Mastercard, by making it easier for consumers to use their cards online. But as the new fintechs have gained clout, their decisions about the sorts of payments they offer could influence how much money travels along the card networks. Stripe, a large payments-infrastructure firm, says it is working to provide merchants with payment methods that will lower their costs. Current options include a box for customers to enter card details, but also Klarna, a "buy-now-pay-later" provider through which customers can pay for purchases using bank transfers, thus avoiding the card networks. It could soon include things like FedNow, a real-time bank-transfer system being built by the Fed, which is due to be launched next year. In time, it could even include central-bank digital currencies or cryptocurrencies.

Competitors might make little headway if the perks for sticking with credit cards are sufficiently juicy. But merchants can offer their own incentives. When your correspondent recently went to purchase a pair of linen trousers from Everlane, an online retailer, she was encouraged to pay using Catch, a fintech app. The app linked to her bank account via another payment startup called Plaid. As a thank you for avoiding the card networks, Everlane offered a shop credit worth 5% of the transaction value. Catch has signed up a handful of fashionable, millennial brands including Pacsun, another clothing retailer, and Farmacy, a skincare firm. For evidence that this poses a threat, look no further than Visa's attempted purchase of Plaid. In 2020 the firm tried to buy the upstart for $5.3bn, only for the deal to be scuppered by antitrust regulators on the grounds that the transaction would have allowed Visa to eliminate a competitive threat. Ultimately, Visa gave up, but the attempt was nonetheless telling. The house of cards carefully constructed by the two payment giants is formidable and long-standing. But it is not indestructible.

An anonymous reader quotes a report from TechCrunch: The House Committee on Financial Services released a report late last week offering a harrowing glimpse inside Robinhood during the frenzy around Gamestop stock early last year. The stock trading and investing app was blindsided by the surge in interest from the first big "meme stock" after Redditors and other retail investors rallied around $GME and sent its price into the stratosphere. For Robinhood, which offers individual investors a relatively frictionless way to dive into the stock market, the saga was simultaneously a massive windfall of new users and brand interest and an existential threat that almost did the company in.

House Financial Services Committee Chairwoman Maxine Waters (D-CA) called for a deep dive into what happened behind closed doors, and the new report, "Game Stopped: How the Meme Stock Market Event Exposed Troubling Business Practices, Inadequate Risk Management, and the Need for Regulatory and Legislative Reform," collects the committee's findings. The report, embedded below, is culled from a number of hearings, 95,000 pages of documents and 50 interviews. "My Committee's investigation into the matter showed we need better market regulation to address the troubling business practices that were uncovered during our investigation," Waters said. "Payment for order flow and gamification make it profitable for a new generation of trading apps to push retail investors to make as many trades as possible, making the markets more volatile than ever."

The committee described Robinhood's business as "troubling," citing its preference for aggressive growth without adequate risk management. The report also found that the majority of financial firms the committee examined don't have any plans in place to prepare for another risky phase of "extreme" market volatility. According to the report: "On the morning of January 28, 2021, Robinhood had approximately $696 million in collateral already on deposit with the NSCC, leaving it with a collateral deficit of approximately $3 billion, which it was required to post to satisfy the NSCC's clearing fund requirement or risk being in violation of the NSCC's rules and potentially losing the ability to clear trades for their customers altogether. [President and Chief Operating Officer for Robinhood's clearing operation] Swartwout confirmed that this amount came as a surprise to Robinhood and explained to Committee staff that they had anticipated and prepared for the $1.4 billion of collateral deposit requirements that represent 'core' charges, but because they did not model for Excess Capital Premium charges, Robinhood therefore did not expect and had not arranged adequate funding for the additional $2.2 billion Excess Capital Premium charge. On the morning of January 28, 2021, Jim Swartwout texted Gretchen Howard at 6:29 a.m. EST, writing 'Huge liquidity issue.'" "Ultimately, the company secured a waiver for its collateral requirements, paused some trades and averted disaster but there's no guarantee that history won't repeat itself and shake out a different way," concludes the report. "In light of the report, Waters called for 'significant' legislative reforms to prevent another Robinhood-style near-meltdown."

Further reading: FTX Exploring a Deal To Buy Robinhood

Chinese President Xi Jinping chaired a meeting Wednesday that approved promoting the "healthy" development of the payment and fintech sectors, a sign that a broad crackdown on tech companies like Ant Group may be easing. From a report: The meeting of the central commission for deepening overall reform also backed enhancing regulation of major payment platforms, state broadcaster China Central Television reported, adding that companies would be encouraged to return to their roots while the authorities will improve regulation. As part of the plans, China would ensure the security of payment and financial infrastructure, and work to prevent and defuse systemic financial risks, CCTV said. The government will also enhance oversight of financial holding companies and financial institutions invested by platform firms, the report said, without adding details.

The cryptocurrency industry is ramping up efforts to recruit more legal talent as it faces increased regulatory pressure while looking to be accepted by and become part of mainstream finance. From a report: Crypto exchanges and companies are poaching attorneys left and right, from both law firms and other crypto companies, bringing them in-house to help navigate an evolving regulatory landscape while helping to curb outside legal expenses, industry participants said. Law firms, which are sometimes losing their partners to in-house positions, are also building up their crypto practices to maintain that valuable expertise. The increased demand for lawyers also marks a turning point for crypto, whose early supporters often expressed skepticism of regulation. The industry has been expanding rapidly with hopes of attracting more mainstream investment opportunities and many are embracing the stance that they want regulatory clarity.

U.S. Treasury Secretary Janet Yellen said on Thursday crypto asset regulations should support responsible innovation while managing risks, sticking to the contours of a recent White House executive order that was well-received by the crypto market. From a report: In a speech on digital assets policy released by the Treasury, Yellen said that in many cases regulators already have authorities that can manage crypto risks and provide appropriate oversight of new types of intermediaries such as digital asset exchanges. "Our regulatory frameworks should be designed to support responsible innovation while managing risks -- especially those that could disrupt the financial system and economy," Yellen said in the excerpts of her speech to be delivered at American University in Washington. "As banks and other traditional financial firms become more involved in digital asset markets, regulatory frameworks will need to appropriately reflect the risks of these new activities," she said.

European Union lawmakers were set on Thursday to back tougher safeguards for transfers of bitcoin and other cryptocurrencies, in the latest sign that regulators are tightening up on the freewheeling sector. From a report: Two committees in the European Parliament have thrashed out cross-party compromises to be voted on. Crypto exchange Coinbase has warned the rules would usher in a surveillance regime that stifles innovation. The $2.1 trillion crypto sector is still subject to patchy regulation across the world. Concerns that bitcoin and its peers could upset financial stability and be used for crime have accelerated work by policymakers to bring the sector to heel. Under the proposal first put forward last year by the EU's executive European Commission, crypto firms such as exchanges would have to obtain, hold, and submit information on those involved in transfers. That would make is easier to identify and report suspicious transactions, freeze digital assets, and discourage high-risk transactions, said Ernest Urtasun, a Spanish Green Party lawmaker helping to steer the measure through the parliament. The Commission had proposed applying the rule to transfers worth 1,000 euros ($1,116) or more, but under the cross-party agreement this 'de minimis' rule has been scrapped -- meaning all transfers would be in scope.

An anonymous reader quotes a report from Motherboard, written by Maxwell Strachan: A new tech startup plans to become "the stock market of litigation financing" by allowing everyday Americans to bet on civil lawsuits through the purchase (and trade) of associated crypto tokens. In doing so, the company hopes to provide funding to individuals who would otherwise not be able to pursue claims. "Ryval's goal is to make access to justice more affordable," said Kyle Roche, a trial lawyer and one of the startup's founders. "What I want to do is make the federal court system more accessible for all." [...] The way it works is a little like a crypto-infused and lawsuit-focused GoFundMe, if the crowd stood to profit from their investment. The company takes advantage of a rule created through former President Barack Obama's JOBS Act, which allowed a private company to crowdfund up to $5 million from Americans, regardless of their wealth. Using the Avalanche blockchain, Ryval will allow "all investors regardless of accreditation status" to purchase tokens associated with a specific case and then hold or trade them on the open market. Whoever owns the token at the time of a settlement or verdict then cashes in. The team has dubbed the sale of tokens an "initial litigation offering," and Roche has compared Ryval to Robinhood, but for the law. (A caveat: While wealthy and sophisticated "accredited investors" will be able to trade lawsuit tokens immediately, the non-rich will be legally required to agree to a year-long lockup period, according to Insider.)

The concept of litigation funding isn't unique. An industry built around the concept has been growing in popularity in recent years. Between June 2019 and June 2020, investors plowed $2.5 billion into the litigation funding sector, according to the finance advisory firm Westfleet Advisors. But up until now, only so-called "accredited" wealthy investors could put their money into the sector. Through the use of crypto tokens, Ryval claims, it can legally open up access to the industry to all. The tokenization of U.S. law will benefit users in a few other ways, including by providing the market with liquidity that previously wasn't available in litigation funding, Roche claims. If someone with a token needs money or believes a case is heading south, they can sell their token to the highest bidder and cash out. Such tradeability will also allow the value of a token to rise or fall as the case develops. "Let's say, the plaintiff gets a big ruling from the court -- not a win, but a big ruling. The price may go up," he said. Roche's law firm, Roche Freedman, has been working with the financial technology company Republic and smart contacts platform Ava Labs, which created the Avalanche blockchain and whose tagline is "Digitize All The World's Assets," to develop the Ryval. While still in the early going, Roche expects a full team will be announced in the first quarter of the year. [...]

Roche understands that messaging will be "very important" in the early going, which is why for the first few years, Ryval will be "focused on access to justice and taking on claims that we believe are good claims," he said. "But at the end of the day, I don't think anybody should be the gatekeeper to who has access to the courts. I think access to the court system, access to the legal justice system should be something that is given to as many people as the justice system can handle." Roche believes Ryval lawsuits will "run the full gamut" and include antitrust, securities claims, and wrongful termination. Asked if there were any types of cases Ryval would avoid, Roche replied, "I don't see anything that I wouldn't categorically not go near." To help novices navigate such a complex industry and decide where to place their bets, Ryval will provide users with the basic facts of the case and the procedural elements necessary in order to win, as well as other relevant information like how often a particular type of case is successful. "One of the real responsibilities we have in building this platform is to educate the market," Roche said. But Roche said retail investors stand to gain more than they stand to lose by entering the legal market. "These investments have been very lucrative over the course of the last five to 10 years," Roche said, adding that some top law firms average an "astronomical" annual percentage rate of 30-to-40 percent. He expects interest will be especially high in the event of a downturn, since litigation outcomes are largely "market agnostic," providing people with an alternative form of investment.

Despite the European Union's highest court twice declaring that the United States does not offer sufficient protection for Europeans' data from American national security agencies, the social media giant's lawyers continue to disagree, according to internal documents seen by POLITICO. Their conclusion that the U.S. is safe for EU data is part of Facebook's legal argument for it to be able to continue shipping data across the Atlantic. From the report: In July 2020, the Court of Justice of the European Union (CJEU) struck down a U.S.-EU data transfer instrument called Privacy Shield. The court concluded Washington did not offer adequate protection for EU data shipped overseas because U.S. surveillance law was too intrusive for European standards. In the same landmark ruling, the Luxembourg-based court upheld the legality of another instrument used to export data out of Europe called Standard Contractual Clauses (SCCs). But it cast doubt on whether these complex legal instruments could be used to shuttle data to countries where EU standards cannot be met, including the U.S. The CJEU reached a similar conclusion in 2015, striking down the predecessor agreement to Privacy Shield because of U.S. surveillance law and practices. In both rulings, Europe's top judges categorically stated Washington did not have sufficiently high privacy standards. Still, Facebook -- the company at the heart of both cases -- thinks it shouldn't follow the court's reasoning.

The company's lawyers argue in the documents that the EU court ruling "should not be relied on" for the social media company's own assessment of data transfers to the U.S., because the judges' findings relate to Privacy Shield data pact, and not the Standard Contractual Clauses which Facebook uses to transfer data to the U.S. "The assessment of U.S. law (and practice) under Article 45 GDPR is materially different to the assessment of law and practice required under Article 46 GDPR," the document reads. That refers to the two different types of legal data transfer instruments under the EU's General Data Protection Regulation and indicates that assessment under SCCs is different to assessment under Privacy Shield. The company also says that changes to U.S. law and practices since the July 2020 ruling should be taken into account. As an example, it cites the U.S. Federal Trade Commission, a watchdog, "carrying out its role as a data protection agency with unprecedented force and vigour." Those arguments have been central to Washington's pitch during ongoing transatlantic negotiations over a new EU-U.S. data agreement. "Though companies have to take the EU court ruling into account when making their own assessments of third party country regimes, they can, in theory, diverge from the court's findings if they believe it is justified in a particular situation," notes Politico. "This means that companies like Facebook can, in theory, continue to ship data out of Europe if they can prove its sufficiently protected."

An anonymous reader quotes a report from Ars Technica: The CEOs of 13 large European telecom companies today called on tech giants -- presumably including Netflix and other big US companies -- to pay for a portion of the Internet service providers' network upgrade costs. In a "joint CEO statement," the European telcos described their proposal as a "renewed effort to rebalance the relationship between global technology giants and the European digital ecosystem." The letter makes an argument similar to one that AT&T and other US-based ISPs have made at times over the past 15 years, that tech companies delivering content over the Internet get a "free" ride and should subsidize the cost of building last-mile networks that connect homes to broadband access. These arguments generally don't mention the fact that tech giants already pay for their own Internet bandwidth costs and that Netflix and others have built their own content-delivery networks to help deliver the traffic that home-Internet customers choose to receive.

Today's letter from European ISPs was signed by the CEOs of A1 Telekom Austria Group, Vivacom, Proximus Group, Telenor Group, KPN, Altice Portugal, Deutsche Telekom, BT Group, Telia Company, Telefonica, Vodafone Group, Orange Group, and Swisscom. They wrote: "Large and increasing part of network traffic is generated and monetized by big tech platforms, but it requires continuous, intensive network investment and planning by the telecommunications sector. This model -- which enables EU citizens to enjoy the fruits of the digital transformation -- can only be sustainable if such big tech platforms also contribute fairly to network costs." The European telcos didn't mention any specific tech giants, but Reuters wrote today that "US-listed giants such as Netflix and Facebook are companies they have in mind." The letter also discusses other regulatory topics related to fiber and mobile broadband, saying that "regulation must fully reflect market realities... Namely, that telecom operators compete face-to-face with services by big tech."

RestOfWorld.org tells the story of a libertarian 'startup city' in Honduras that was "supposed to be a privatized, Silicon Valley-funded paradise."

Co-founded by 37-year-old Venezuelan Erick Brimen, "Próspera's founders promised to enrich the local community, even supplying water to a nearby village. But relations with neighboring communities deteriorated. Then, Próspera turned off the taps..."

Próspera's founders believe the future of government lies with privatized startup cities. They belong to a movement with deep roots in U.S. libertarian circles: one that wants to redefine citizenship and governance in tech-consumerist terms. It has gained momentum in recent years, as high-profile Silicon Valley figures, like PayPal co-founder Peter Thiel and venture capitalist Marc Andreessen, put their money behind startup city initiatives.

Some governments have been drawn to the idea, too, hoping it will attract foreign investment and spur economic growth. In 2013, Honduras passed a law allowing people like Brimen to set up semi-autonomous, privately run cities, "zonas de empleo y desarrollo económico" (zones for employment and economic development), or "ZEDEs" — pronounced "zeh-dehs." These cities are to be governed by private investors, who can write their own laws and regulations, design their own court systems, and operate their own police forces. The Honduran government granted Próspera ZEDE status in late 2017. Subject to limited government oversight and few legal restrictions, a set of for-profit firms incorporated abroad by Brimen and his business partners will govern the city — with ambitions to expand across [its Honduran island] Roatán and onto the Honduran mainland.... This year, skeptical Hondurans organized weeks of anti-ZEDE protests across the country. They fear cities like Próspera will leave ordinary people no better off than they were before, while ceding to profit-driven investors the power to decide what's in the public interest...

Applications for [Próspera] residency require a background check, a Honduran residency permit, and an annual fee — $260 per year for Hondurans and $1,300 for foreigners. Prospective residents will also have to sign something called an "agreement of coexistence," which lays out all the rights and responsibilities of Próspera residents and Próspera's obligations to them. Brimen characterized it as, "if you could make the social contract a real contract." The agreement incorporates Próspera's resident bill of rights, which is modeled on the U.S. Bill of Rights but with some decidedly libertarian twists. Government services will be centralized and automated through ePróspera, an online portal modeled on the much-praised e-Estonia system developed by the Baltic nation. From the comfort of their homes, Prósperans will be able to pay taxes, incorporate a company, transact business, and even buy real estate. They'll be able to vote, too, but their franchise is limited. Residents elect only five of the council's nine members. Landowners vote for two of the five, with voting power pegged to acreage. Buy more land, buy more votes. Próspera's founders choose the four remaining council members, and a six-member supermajority is needed to alter policy.... Government services will be provided entirely by a contractor...

Effective tax rates will sit in the low single digits, and, in place of Honduran courts, there's a private arbitration center. But where the business inducements enter unprecedented terrain is health and safety regulation. Próspera won't impose rules so much as curate prix fixe and à la carte menus of rules. Companies will be able to opt into an existing regulatory regime — choosing from dozens of countries and U.S. states — or they can Frankenstein together an entirely novel code, mixing and matching rules from different jurisdictions and even inventing new ones. [The building code for one new construction site is a pastiche of Honduran and U.S. law.] The lone requirements: sign-off by Próspera's governing council and a liability insurance policy, most likely underwritten, [Próspera co-founder] Delgado says, by offshore insurers.
RestOfWorld carefully chronicles how Próspera became unpopular with locals. In the summer of 2019, Próspera connected a nearby village to its own water supply. Then started billing them. (Though the water bills eventually stopped.) After protests over the fact that few construction jobs went to villagers — and how Próspera's armed security guards began asking pedestrians for identification — several local groups issued a critical statement while villagers elected a new council empowered to speak for them.

It all came to a head when the council asked Brimen to cancel a public meeting (due to surging Covid cases), which Brimen insisted was a violation of his free speech. He held the meeting anyways, local police were sent to break it up, and one of Brimen's bodyguards "scuffled" with one of the officers as his other bodyguards whisked him to safety. The incident made the local news and social media. Then the next month "Próspera Foundation" threatened to cut off the village's water within 30 days if they didn't formally request the foundation's intervention in writing.

The village instead appealed to a local congressman/mayoral candidate, who by mid-January had fully restored the village's water supply.

Athletes don't get advance warning of drug tests. Police don't share schedules of planned raids. Yet America's Environmental Protection Agency (EPA) does not seem convinced of the value of surprise in deterring bad behaviour [the link may be paywalled]. From a report: Every year it publishes a list of dates, spaced at six-day intervals, on which it will require state and local agencies to provide data on concentrations of harmful fine particulate matter (PM2.5), such as soot or cement dust. In theory, such a policy should enable polluters to spew as much filth into the air as they like 83% of the time, and clean up their act every sixth day. However, this ill-advised approach does offer one silver lining: it lets economists measure how much businesses change their behaviour when the proverbial parents are out of town.

A new paper by Eric Zou of the University of Oregon makes use of satellite images to spy on polluters at times when they think no one is watching. NASA, America's space agency, publishes data on the concentration of aerosol particles -- ranging from natural dust to man-made toxins -- all around the world, as seen from space. For every day in 2001-13, Mr Zou compiled these readings in the vicinity of each of America's 1,200 air-monitoring sites. Although some stations provided data continuously, 30-50% of them sent reports only once every six days. For these sites, Mr Zou studied how aerosol levels varied based on whether data would be reported. Sure enough, the air was consistently cleaner in these areas on monitoring days than it was the rest of the time, by a margin of 1.6%. Reporting schedules were almost certainly the cause: in areas where stations were retired, average pollution levels on monitoring days promptly rose to match the readings on non-monitoring days.