That tension is creating demand
for technology design choices that won’t
permit companies to police their
customers. Facebook enabled end-to-
end encryption for its Messenger app,
and Apple Inc. built its iPhones in such
a way that even Apple can’t hack into
them. When Open Whisper Systems
received a subpoena requesting user
information for its encrypted messaging
app Signal, it was only able to supply the
duration of a user’s membership. The
company retained no other information
about its users.
Tech companies are also starting
to use a double-blind information- sharing
technique known as homomorphic
encryption to collect and analyze data.
They get the benefits of massive data
mining without the responsibility for
monitoring it. Proposed applications
for this technology range from medical
records to voting software. Double-blind
computation used to be prohibitively
expensive, but technological advances
have made it feasible for large-scale
analysis. Instead of a reassuring motto like
Google’s “Don’t Be Evil,” systems can now
be designed to preclude evil.THE CYPHERPUNK movement in the early
’90s foresaw the lawlessness ofSuch relationships may feel
comfortable, but they don’t
accommodate the size and scale of
modern societies. As civilization evolved,
institutions arose to enforce rules and
lower the risk of cooperating with
strangers. Instead of trusting each of our
counterparties, we need only trust the
institutions. Now we can trade trillions of
dollars in assets in the financial markets
every day without worrying whether
a stock certificate might be a forgery.
We don’t outsource trust in all
aspects of life. A lot of laws aren’t strictly
followed or enforced. Instead we rely
on communities to come to a consensus
regarding socially acceptable behavior.
For example, U.S. traffic laws: Boston-
area drivers get away with a lot of
behavior that would get them promptly
arrested in Portland, Ore.
It’s not unusual for friends to get
together for a game of poker with a cash
buy-in. Technically, gambling is illegal in
the U.S.! The Constitution’s Fourth
Amendment limits the state’s power
to control our lives, protecting us from
having police randomly barge into our
homes. Even if the government wanted
to regulate private behavior, it couldn’t
station a police officer in every home
to follow our every move.
Except, increasingly it can. Today,
people are unlikely to pay cash for their
March Madness office betting pools.
More likely they’re using Venmo, where
payments are automatically screened for
suspicious activity. Anything that appears
illegal, even transactions between friends,
results in a locked account.
DIGITAL PANOPTICONS enable stricter
enforcement of rules than previously
seemed possible (and maybe were ever
thought desirable). Money laundering
was criminalized in the 1930s, but
it wasn’t until the Bank Secrecy Act of
1970 that financial institutions were
required to actively police it. Back when
customer records lived in filing cabinets,
it was infeasible to monitor every
transaction for suspicious activity.
Once it was established that a
financial-services provider could be found
liable for a customer’s source of funds,
its responsibilities rapidly expanded.
Today, not only do banks need to comply
with know your customer (KYC) laws,
they’re also expected to know your
customer’s customer (KYCC). The idea
of currency—money that belongs to
its current holder—is gone, replaced by
the notion that the provenance of every
asset must be traced. Even gold bars can
be burdened by their history.
Regulatory outsourcing isn’t
limited to banks. Any company with
an internet-connected database can
be deputized for law enforcement.
Facebook Inc. and Alphabet Inc.’s
Google respond to tens of thousands
of government data requests each year.
Amazon.com Inc. has been ordered to
turn over Echo recordings from its smart
home speakers. Large tech companies
even provide handy web portals through
which law enforcement agencies can
request records.
Facebook Chief Executive
Officer Mark Zuckerberg made the most
compelling case against breaking up
his company at the Aspen Ideas
Festival in June, when he pointed out
the potential loss of an ally in helping
regulators address problems like
election interference and misinformation
campaigns: “Breaking up these
companies wouldn’t make any of these
companies better. ...You would have
those issues, you’d just be much less
equipped to deal with them.”
Facebook keeps intimate
information on more than 2 billion people
in one convenient location. Why would
the government break that up?THERE’S A CONFLICT here. Technology
that was created to promote cooperation
between strangers is now being used to
control them.
As businesses become
increasingly global, they’re torn between
a need to comply with U.S. laws and a
desire to avoid alienating their own
customers. After Edward Snowden’s
disclosures of tech companies’
complicity in National Security Agency
surveillance, foreign customers fled U.S.
tech providers in favor of overseas
competitors. More recently, workplace
productivity app creator Slack
Technologies Inc. came under fire for
blocking users in Iran, Cuba, and other
countries sanctioned by the U.S.
Microsoft Corp.-owned GitHub followed
with similar actions soon after.North America Other Americas
Eastern Europe Other Europe
Asia Africa OceaniaFraying Ties
Change in the number of active U.S. dollar
correspondents by region since 201120110%201816 BLOOMBERG MARKETS