Monday, 27 June 2016

Britain's Emigrants Queue For Ex-EU Handouts

As the final echo of the Vote Leave battle bus dies away amongst the villages and byways of England's south west, a strange chant rises in its place. Jacob Rees-Mogg MP, Conservative Party spokesperson for South West England, pauses in his piece-to-camera for a German film crew investigating Roman tin mines, listens, then shakes his head. "Never mind," he says to the director. But as the crew ready themselves for a re-take, a battered green Land Rover draws up and a familiar local official emerges. 

"Not now, Arnold."

But the man steps forward, flat cap held nervously in front. A faint breeze brings with it the hum of "We want our grants!" and catches the man's exposed comb-over so that it stands up like a horse-hair plume on a Roman soldier's helmet.

"Beggin' your pardon, sir."

The Germans begin filming.

"Not now, I say."

"It's about the three fifty million, sir."

"Yes, yes," Rees-Mogg snaps, trying to focus on the camera. "Boris has it in hand."

"That's what we're worried about, sir."

Rees-Mogg waves him away. "It's a figure of speech, man. Can't you see I'm working?"

"Not all of us are lucky enough to have jobs, sir."

"Look, we have years to worry about that, but a week to complete this film about the region's economic heyday before the funding from Brussels runs out. We can discuss it later." 

"That's not what the gentleman from the Commission used to say - "

"Go away! Please!"

"- he were very responsive."

Rees-Mogg heaves a sigh and says to the German. "Sorry, we can edit all this out."

"The Cornish are restless, sir," Arnold persists. 

Rees-Mogg sighs again, "It was ever thus," he says, partly for the German director's benefit. "Look," he says, turning to Arnold, "Explain to them that it was written in letters three feet high and thirty feet long that all the money would be spent on the National Health Service. So if they want their share, they should jolly well get sick."

"I could tell 'em that, sir. But I don't think they'll be very pleased."

"Well, then they can call Boris."

"Yes, sir."

"Now go away."

"Yes, sir."


Friday, 24 June 2016

Little Britain Votes To Leave

In the worst act of vandalism since the Visigoths sacked Rome in 410, the UK has been ripped out of the European Union by regional voters, led by a trio of politicians that caricaturists could only dream of who perpetrated a campaign that "descended into dishonesty on an industrial scale". 

Yet the Brexit map of the UK shows that those who voted for Britain to leave the EU are not only among those who were the net beneficiaries of EU funding, but are also utterly dependent on the areas that voted to remain to negotiate the terms of Brexit and to plug the regional funding gap that the EU money filled: the 'Leave' campaign demanded that Britain's contribution to the EU be diverted into the black hole that is the NHS budget and that is exactly where it will disappear.

All the facts and projections labelled as 'doom and gloom' now loom as reality. 

Wednesday, 22 June 2016

Forking The DAO - Robin Hood Update

No, this is not science fiction: the Ethereum world really has been rocked by financial scandal, and has less than a month to resolve it.

It's very hard to explain this situation simply to fans of financial scandals who may be less familiar with cryptotechnology.

In essence a bunch of people ('curators') got together and created - or curated - a new type of open association, which they christened a Decentralized Autonomous Organization, and this first example “The DAO"

The DAO is built on a new type of cryptographic software platform called a 'distributed ledger' or 'blockchain', in this case known as Ethereum. Such ledgers typically have their own virtual currency, in this case called 'ether'. 

The DAO's rules are in written in software code, so it is in fact a computer programme (or application or 'app'). The DAO is designed to be controlled by investors who use their 'ether' to buy DAO 'tokens' that entitle them to vote on the The DAO's affairs - the main issue being how the DAO should invest the 'ether' it raises through selling 'tokens' to investors, who can also start mini-DAO or 'child DAOs' to focus the investments. By last week the The DAO had raised $60m worth of ether at the going exhange rate.

You can maybe see what's coming...

A savvy participant noticed that The DAO would allow any participant to start a 'child DAO' under their own control and drain 'ether' from The DAO into the child DAO without bothering any of the other participants. 

So they did. 

Cue outrage!

The other participants and 'curators' now say this move was an "attack" that exploited a 'vulnerability' arising from a 'mistake' in The DAO's code. As a result, a 'soft fork' has been imposed by the DAO's 'curator' for 28 days, effectively freezing the child DAO and the ether within it. Many of The DAO's participants want to see the soft fork become permanent - or a 'hard fork' (this saga is providing endless scope for unfortunate puns). Yet The DAO web site's makes it very clear that the code is the sole contract governing The DAO (though what contractual significance The DAO's web site has is therefore questionable).  At any rate, The DAO clearly allowed what in fact happened.

It's ironic that the self-styled "attacker" has resorted to lawyers and is threatening court action to protect his/her/their financial gains. But it would be a fascinating case to run, and a real-world judgment on the issues (applicable law, jurisdiction, whether there was a mistake for which relief could be given etc.) could actually be very helpful to the development of distributed ledgers and the applications that run on them.

23 June:

Meanwhile, the parties are battling it out in a cryptographic re-enactment of Robin Hood (or Barbarians at the Gate?). So-called 'white hat' hackers (claiming to be 'good actors') attempted to secure the remaining ether in The DAO in other child DAOs but the 'attacker' joined them as well.

But is either set of participants 'right' or 'wrong', 'good' or 'bad'? Are they not simply competing in any fashion that The DAO allows?

Would you do business with The DAO or its 'children'?

Would you be happy for The DAO or any child DAO to be an investor in your business? 

Watch this (cyber)space!

Further reading:
Frances Coppola has written a great piece for Forbes.
Introduction to the DAO.
Open letter from "The Attacker".
DAO Wars: Hacker Counter-Attacks and Infiltrates the Robin Hood DAOs

Friday, 13 May 2016

European Privacy Regulators Now Not Happy With US #PrivacyShield

It all seemed to be going so smoothly for US policy-makers when the gathering of the EU's privacy regulators (the Article 29 Working Party) issued a draft review of the US Privacy Shield in February. But the final report means the champagne will remain in the bottle for sometime yet.

Basically, the regulators found the Privacy Sword Shield is hard to read, unclear, inconsistently worded, inconsistent with the new General Data Protection Regulation, does not provide equivalent protection, makes it too hard for foreigners to get redress, the proposed Ombudsman will be neither independent nor adequately resourced; and does "not exclude massive and indiscriminate collection of personal data originating from the EU"!

Meanwhile, data transfers from the EU to the US are still okay to take place under the existing data transfer mechanisms ('standard model clauses' and 'Binding Corporate Rules').

Pity Mr Schrems who managed to overturn the 'Safe Harbor' but leave us even less protected than before!

Friday, 15 April 2016

There's No Single Market For Consumer Finance: What Next?

Perhaps it's not what the European Commission intended, but its green paper on retail financial services is a great explanation of why there is so little cross-border activity in consumer finance: 3% for payment cards, current accounts and mortgages; 5% for loans (less than 1% between Eurozone countries!) and only 3% of gross insurance premiums. For a very long list of reasons, it's just not practicable for most retail financial services providers to operate across EU borders, as the EC has known since at least 2007. Could it be time, therefore, to scale back EU requirements for firms that only focus on their national market, so consumers have a clear choice between national and genuinely cross-border suppliers and products?

The Commission concedes that its vast, confetti-like attempt to harmonise EU financial regulation  has proved futile in catalysing a single retail finance market, yet it continues to ask what more can be done.

One issue in particular that the Commission is huffing and puffing about is 'geo-blocking', the use of technology to identify and block or re-direct consumers based in certain countries.

But the Commission's own findings are that few players have the resources to focus on cross-border markets. Suppliers who do target multiple countries typically use separate local operating entities to deal with all the problems listed in the green paper, so they don't even properly qualify as 'cross'-border. At any rate, how can you force a Spanish motor insurer to sell policies to Germans if it simply can't afford to administer claims in Germany? How would that be in the policyholders' interests? Even assuming the focus solely on Spanish customers is the supplier's own choice, rather than due to some legal restriction, wouldn't requiring the firm to deal with Germans or Swedish consumers put it at risk of going bust, leaving the whole market to a few big players who can afford to serve customers everywhere?

In its response to the green paper, the UK's Financial Conduct Authority quite rightly urges caution on the economic impact of more (futile) regulation, as well as careful analysis of consumer needs and behaviour before churning it out. The FCA points out that existing regulation must be allowed to 'bed-in' before assessing its real impact; and the Commission needs to consider that EU consumers are not some amorphous clump of flesh waiting eagerly for Greek insurance policies homogeneous, but diverse in their needs and behaviours - so a 'one-size-fits-all' approach won't be universally acceptable and risks crushing local financial services that are working well.

The FCA hints at the idea of a range of EU-approved products that might be provided by any EEA firm to any EEA consumer in a standard way, though this still begs the question whether the providers are able to manage this operationally. 

I guess it's possible that those able to target cross-border markets would benefit from some kind of voluntary EU-cross-border safe harbour scheme that enables them to adopt the same approach to marketing, contracts, customer service, complaints handling and enforcement and so on throughout their target market(s). It could even be very a attractive product in some national markets that are currently under-served or where consumers are being fleeced.

But that's more or less what the current regime allows, yet few firms are bothering to do it: the whole point is that we know it is futile to impose a cross-border scheme on firms and consumers who just want to focus on their own national, regional or local market.

Which begs the question: rather than add more regulation, why not allow member states to scale back EU requirements for firms that wish to remain nationally focused? This would allow further differentiation between national and cross-border suppliers and products, presenting consumers with a clearer choice to make.

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