Tracking the pulse of digital governance and diplomacy in 2023: A quarterly progress report

3. Technologies: Less hype, more impact

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Our first quarterly report for January–March

Apart from AI, the start of the year was technologically quiet. Unlike previous years, Davos did not announce any new cutting-edge technology. Metaverse technologies have lost momentum as a part of the overall tech sector crisis. Tencent Holdings abandoned its plans to enter the virtual reality hardware market, while Microsoft announced that it is closing its enterprise metaverse division. In a letter to his staff, Mark Zuckerberg signalled reduced support to Metaverse as their ‘single largest investment is in advancing AI and building it into every one of our products’. Some analysts interpreted this as the start of Meta’s back-paddling from the metaverse project. 

We might expect the downward trend to continue, however, Apple’s announcement of releasing VR or AR goggles (rumour has it – June 2023) could give another push to the concept/technology. The trend of exploring the metaverse’s potential beyond gaming could be a ‘life saver’ for the metaverse. For instance, as an increasing number of universities are delving into the possibilities of immersive learning and Amazon bringing metaverse to e-sports and education sectors and the Indian University launching an MBA programme in the metaverse and web 3.0.

It is noteworthy that the development of the metaverse has garnered greater attention from Asian governments in comparison to the rest of the world, particularly in China and South Korea. These countries are exploring the potential of metaverse technology beyond gaming, with applications in industries and public administration. South Korea’s Ministry of Science and ICT has a Metaverse Fund to drive metaverse initiatives in the country and Seoul officially launched its metaverse platform. While in China, Shanghai, and Zhejiang have implemented metaverse development strategies in 2022.

Meanwhile, quantum computing is getting ‘regular’ visibility from time to time. 

What’s ahead of us?

AI will continue to dominate tech developments. We can expect more competition to ChatGPT from the main competitor Google with its large language model (LLM) and Meta’s open-source LLaMa. For example, LLaMA has the advantage of being 10 times smaller than other comparable models. If LLaMA can achieve similar results to GPT-4, it can democratise AI research, making it affordable for organisations and individuals with much fewer resources. And there are other open-source models, such as BLOOM and OPT.

What did we predict on technological developments in January 2023?

Last year started with a few big promises. Web 3.0, the metaverse, and AI in decentralised blockchain networks promised us astonishing feats. Enthusiasm dwindled towards the end of the year (with the exception of AI’s steady momentum). 

This year started without any announcements about the next big thing in technology. This will create the space to take a step back and see how we would like to shape our digital future.

The metaverse tops the list of the buzzwords in 2022, courtesy of Meta CEO Mark Zuckerberg’s vision announced at the end of 2021. Fast forward to January 2023: The metaverse is not taking off the way it was envisaged by Meta, formerly Facebook, which centred its future business model around the metaverse. The initial monthly target of 500,000 active users on Horizon Worlds – Meta’s metaverse platform – was reduced to 280,000 users. Currently, there are fewer than 200,000 active users per month. Some of Horizon’s virtual spaces have never been visited. 

Yet, we feel this slow down is temporary. Heavyweights Microsoft, Apple, and Google are also heavily investing in metaverse applications and tools. A new generation of users with gaming experience will dominate the internet population in the coming years. In the long-term, the metaverse or virtual/extended/augmented realities are here to stay, and 2023 will be the year for background developments and regrouping, ahead of future growth in the metaverse, VR, and AR in the medium- and long-term. 

Blockchain suffered a negative spillover from the recent troubles on the cryptocurrency market. The demise of the FTX showed how the technical architecture of blockchain can be abused to achieve the exact opposite of the proclaimed benefits.   

Blockchain technology’s potential for decentralisation can be easily transformed into centralised control by those who control access to blockchain-driven platforms and services.  This is what happened with the tech platforms, which ended up dominating the internet market despite the decentralised technical design of the internet as a network of networks. Whether the same will happen with blockchain remains to be seen in the coming years. 

Last but not least, AI is gaining maturity both in the realisation of AI potential and governance. At the end of 2022, Lensa and ChatGPT created new possibilities for generating texts and images. In 2023, AI will have to move towards productive use, requiring less technology and more organisational and management changes for optimal interaction between humans and machines.

How will digital technology develop in 2023? The answer by ChatGPT is….

Digital technology is expected to continue to evolve rapidly over the next few years. In 2023, we can expect to see further advances in artificial intelligence, machine learning, and natural language processing. We may also see the emergence of new technologies such as quantum computing, blockchain, and 5G networks. Additionally, digital technology will continue to be used to improve healthcare, education, and other areas of society. Finally, digital technology will continue to be used to create new products and services that make our lives easier and more efficient.

4. The IBSA digital moment(um): Linking development, democracy, and diplomacy

IBSA, which stands for India, Brazil, and South Africa, is a group of countries and developing economies with vibrant digital scenes. They are strong supporters of multilateral and multistakeholder approaches, with many examples of inclusion of the tech community, academia, the private sector, civil society, local communities, and other actors in digital governance. 

Can these three countries, which all care about development, democracy, and diplomacy, bring new energy to digital governance?

Update from April 2023: G20 digital health agenda can be India’s gift to the Global South.

India, Brazil, and South Africa (IBSA)  – which collaborate together through the IBSA Forum – are likely to play a prominent role in the process of reforming digital governance. 

There’s momentum around the three D’s: The trio are developing economies, functional democracies, and supporters of multilateral diplomacy. 

The first tangible results from IBSA’s digital momentum could be expected during India’s G20 presidency, which, among others, will promote ‘a new gold standard for data’. 

IBSA and development 

Digitalisation is the engine of growth in IBSA economies. Among the three countries, India is the leader, with a vibrant digital economy. In all three, future digital growth will happen due to their large and young populations and economic dynamics.

But digitalisation also tends to exacerbate major societal tensions that these countries face, including the digital divide, and the need to have digital governance that will reflect local cultural, political, and economic specificities. 

The three countries have spearheaded digital inclusion by prioritising affordable access to citizens, by supporting training for digital skills, and by a legal framework for the growth of small digital enterprises. For example, India’s Aadhaar biometric ID system is seen by many as a leading digital identity initiative, inspiring similar systems in other countries. South Africa has been a leader in the inclusion of women and youth. Brazil works hard with other marginalised groups, from people with disabilities to indigenous people. 

On data and sustainable development, India’s G20 presidency  aims for strategic leadership with the following practical initiatives: (a) self-evaluation of the national data governance architecture, (b) the modernisation of national data systems to incorporate citizen preferences regularly, (c) transparency principles for governing data. With a big population, IBSA countries also see data as a national resource. The Indian G20 presidency’s calls for ‘a new gold standard for data’ can help reconcile the competing issues around the free flow of data and data sovereignty. 

IBSA and democracy

India, Brazil, and South Africa are all working democracies with regular elections and strong civil society scenes. In India, it was a civil society initiative of over 1 million signatures that blocked Facebook’s Free Basics project and helped preserve net neutrality. Brazil has pioneered a unique national multistakeholder model around the Internet Governance Steering Committee (CGI.br). South Africa has had major successes in youth and female inclusion in digital processes on a national level. 

Like other countries, the IBSA trio also have to deal with the digital aspects of their societal and political problems. India has had the highest number of internet shutdowns in the past few years. Brazil has witnessed major misuse of social media platforms during elections. South African women experienced high levels of online violence.

Digital problems are addressed and discussed in media, civil society spaces, and parliaments in India, Brazil, and South Africa. 

IBSA and diplomacy

India, Brazil, and South Africa are supporters of multilateral diplomacy. As members of various international coalitions, processes, and organisations, they have a strong convening capacity. They can also bring about larger regional and global partnerships by engaging countries with similar digital strengths and problems. 

India and Brazil have both hosted meetings of the UN’s Internet Governance Forum (IGF), and both support policy inclusion of academia, civil society, business, and other significant actors. Brazil hosted the 2014 NetMundial meeting, a unique experiment in multistakeholder decision shaping. 

South Africa has been a relatively active actor in global internet governance, from a very prominent role in WSIS negotiations, to engagement in several digital-related processes and discussions such as the OEWG, the Ad-hoc Committee on Cybercrime, UNESCO’s work on the recommendation on ethics and AI, and UN Human Rights Council debates on digital rights.

Many countries, such as Indonesia and Singapore in Asia, Mexico and Argentina in Latin America, and Nigeria, Kenya, and Rwanda in Africa, share IBSA concerns and approaches to digital governance. 

5. Digital cooperation: Build-up for the Global Digital Compact and ‘Digital 2025’

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Our first quarterly report for January–March

The Global Digital Compact (GDC) process has started picking momentum, with a rather packed schedule of consultations and thematic deep-dives in New York and several other related discussions worldwide. The topics selected for the deep dives offer a glimpse into what the GDC is expected to cover (from connectivity and digital inclusion, to sustainable development and AI). At the same time, countries’ positions are shaping up: G77 and China, for example, want the GDC to ‘focus on the pressing need to address the major structural impediments that developing countries face in engaging with and accessing new and emerging technologies’, while ‘avoiding duplication across various entities and processes related to global digital cooperation’. The EU expects the GDC to ‘serve as a roadmap for a human-centric, global digital transformation’.

What’s ahead of us?

On the GDC front, thematic deep-dives continue until June, but probably the most expected immediate milestones are the publication of the Secretary-General’s policy brief, to be issued sometime in April, and the release of the Issues Paper, during the September ministerial meeting. These two documents will offer more insights into the substantive issues that the GDC is likely to cover, and the potential areas of controversy; the Issues Paper itself will serve as the first basis for the negotiations that are likely to start towards the end of the year. Meanwhile, questions remain on both the content of the GDC and the modalities for its development. 

It also remains to be seen whether and to what extent the GDC process will be linked with other processes and fora dealing in one way or another with digital cooperation, including the WSIS+20 review process and the IGF. 

6. Human rights online: Protecting what makes us human

Our first quarterly report for January–March

During the first quarter of the year, the protection of privacy and personal data in the digital space was at the centre of multiple digital policy developments around the world. We have already mentioned above the (relatively) new concerns about the implications of generative AI for privacy and data protection – something that more and more privacy watchdogs are looking into. Besides this, there have been several regulatory, enforcement, and self-regulatory developments worldwide, from India’s and Saudi Arabia’s initiatives to strengthen the legal protections for personal data, through Ireland fining Meta €5.5 million for data breaches, and to Google banning personal loan apps from accessing sensitive data. On other fronts, the EU and Japan have concluded the first review of their Mutual Adequacy Arrangement on personal data protection, and the UN Special Rapporteur on privacy has called on governments to delete personal data collected during the COVID-19 pandemic.

The International Women’s Day in early March brought a well-deserved attention to gender rights. Some of the highlights included debates on the (potential) role of AI in achieving gender equality, the launch of UNESCO’s Women 4 Ethical AI platform, calls to accelerate progress towards bridging gender digital gaps and to meaningfully consider gender issues in the development of the Global Digital Compact, and the release of a new report on the digital targeting of LGBT people. 

Privacy and inclusion – the two issues we have explored above – were also highlighted in the Ibero-American Charter of Principles and Rights in Digital Environments, adopted by the Organization of Ibero-American States. The charter outlines ten principles to guide meaningful digital inclusion, from privacy and security, to fairness and inclusiveness. Another multilateral initiative that saw the light of day recently is the Guiding Principles on Government Use of Surveillance Technologies, a non-binding instrument developed by the 36 member states of the Freedom Online Coalition.

What’s ahead of us

At the core of our predictions in January was the idea that, as digital technologies evolve and become more and more intertwined with our very existence, protecting what makes us human becomes more urgent than ever. This goes beyond issues or privacy, freedom of expression, and the like, to tackle matters such as human dignity, autonomy, and even a right to be humanly imperfect. We expect discussions on such matters to pick up pace in various settings, including in the framework of the Human Rights Council’s discussions on technology and human rights, the Council of Europe’s work on a convention on AI and human rights, and the development of the Global Digital Compact. 

Meanwhile, there is one thing we are quite certain about: legislators, regulators, and courts worldwide will tighten their grip over the private sector and try to strengthen the enforcement of various legal frameworks related to digital rights. What remains to be seen is whether there will be more focus on how to keep governments themselves accountable for their own practices when it comes to protecting human rights. 

7. Content governance: Between Twitter experiments and TikTok geopolitics

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Our first quarterly report for January–March

Unlike a few years ago, there is a global consensus that something has to be done with content policy. Apart from this shared concern, most other questions are open: who, how, and where should regulate content? 

Content policy debates are galvanised around two social media platforms: TikTok and Twitter. Twitter dominated debates after Elon Musk’s takeover on 27 October 2022 but gradually faded away in January 2023 as the TikTok controversy started taking off (again). The Twitter controversy is mainly related to the implications of social media platforms governing content. TikTok has triggered additional geopolitical dynamics between China and the United States. 

The underlying question for both Twitter and TikTok is whether social media companies can develop satisfactory self-regulation policies in-house or if they will need to be forced to regulate content, as is happening in Europe with the Digital Service Act. The US Congress supports amending Section 230 of the US Communications Decency Act (1996), which is the founding document of the social media industry and shields it from responsibility for hosted content.

In an interesting development in global digital policy, UNESCO’s has been working on a set of Guidelines for regulating digital platforms – an international and soft law approach to content policy.

Digital decoupling will accelerate between China and the USA around chips, cables, data, AI, and satellites. On chips, the two sides will slide further apart in the whole cycle of the semiconductor supply chain from design and machines, to production. On cables, the current shared infrastructure will be increasingly divided. As calls for data sovereignty will increase, countries and companies must first distinguish between personal, business, and other types of data and, secondly, make informed trade-offs between the gains and risks of restricting data flows. On AI, we will see if an ‘AI pause’ consensus could be reached at the UN.

What’s ahead of us?

On TikTok dynamics, it remains to be seen if geopolitical or societal rationality will prevail. Following the geopolitical logic only will lead to further decoupling between China and the United States. On a societal level, we can expect a deeper discussion on the impact of social media on children and youth.  

How well Musk’s experiment with Twitter works will influence how content governance changes in the future. His failure or success will bring more clarity in the United States on who, how, and where can govern content. Section 230 of the US Communications Decency Act will most likely be changed. The level of regulation will depend on the success of Twitter and other social media platforms in content self-governance. 

8. Cybersecurity: Preserving the internet in difficult times

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Our first quarterly report for January–March

In February, it was one year since Russia’s attack on Ukraine. The world has changed profoundly. One year later, the cybersecurity aspects of Ukraine war do not make global media headlines. A full-blown cyberwar hasn’t occurred, and this is, of course, good news. Cyberoperations became part of a hybrid war. One year later, governments, the military, and companies are analysing the lessons learned and converting them into strategies to deal with cybersecurity in the new geopolitical and strategic landscape. Cybersecurity has to be addressed holistically, covering a wide range of aspects, from geopolitical risks to the responsibility of companies for the security of their products.

The United States realised that its new National Cybersecurity Strategy foreshadowed more regulation of US tech companies. President Biden boldly said that ‘technology companies have a responsibility to ensure their products are safe before their release’. Like 2022 the EU’s Cyber Resilience Act (CRA), regulators are ending ‘regulatory exceptionalism’ for the digital industry. Like car producers or any other industry, software developers must be responsible for their products.

In March, the UK published the 2023 Cybersecurity Review, which brings more transparency in an otherwise secretive cybersecurity space. UK Review speaks with clarity about cyber power. It’s a change from cyber being used to help with physical attacks to focusing on the mental parts of the war. Offensive cyberweapons are viewed as weapons of information warfare and psychological disruption. Given this significant repurposing of cyber-powers, the UK strategy introduces a set of safeguards, including the selection of targets, observation of legal constraints, and accountability. 

On an international level, despite a snail’s pace, it is good news that the UN Open Ended Working Group (OEWG) continues discussing cybersecurity issues among all countries, including those involved in global conflicts.

What’s ahead of us?

Even though the Russian-Ukrainian war will continue to be a lot of uncertainties, cybersecurity will follow certain trends. Namely, cyber power will be used as a part of hybrid warfare.

On an international level, the UN OEWG may make progress towards developing the Global Directory of Points of Contacts covering diplomatic and technical aspects of cybersecurity. It would be an important confidence-building measure. One can also expect a push for state accountability for cyber-attacks and actions against ransomware, as outlined in the joint statement of like-minded countries.

What did we predict on cybersecurity in January 2023?

Inasmuch as we’d like the internet to be a more secure space, there are at least two reasons hindering everyone’s efforts: 

• New vulnerabilities – as a result of our dependency on complex technologies
• The deteriorating global geopolitics with negative spillovers onto digital space 

The good news is that countries worldwide, especially in Africa and Asia, are increasing their cybersecurity protection. It’s also promising to see UN negotiations on cybersecurity continue. The risks are major, but solutions are emerging.

The Ukraine war, which dominated much of 2022, escalated beyond its borders. The war has been fought both on the ground and online, mostly through cyberattacks. The cyber risks we warned about in the early days of the conflict – from misattribution of cyberattacks to cyber-offences against third countries’ critical infrastructure or companies – remain a viable threat. 

Against this geopolitical backdrop, there are two main reasons why it’s an uphill struggle to make the internet a more secure space.

The first is that we are increasing our dependence on technology more rapidly than ever. For example, we’ve moved everything and anything to the cloud, which once looked safe, but now is becoming less so (as the attacks against and breaches into the cloud services of Twitter, Uber, Revolut, and LastPass confirm). Attackers have become more resourceful and determined to breach anything. 

The second is that technology is getting even more complex: 

• Sensors and the internet of things (IoT) are integrated with industrial systems and their operational technology. 
• Smart code and AI are embedded into everything from health applications to lethal autonomous weapon systems (LAWS) like military drones. 
• Systems get connected through emerging communication technologies like Li-Fi (stands for light fidelity), 5G, and low Earth orbit (LEO) satellites. 

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In our rush to innovate, many of these emerging technologies still lack security standards and good practices, and are easy targets.

There is room for optimism, however. Many governments and institutions have strengthened their cyber-resilience in response to the threat of more severe and impactful attacks, such as those seen during the Ukraine war. Developing countries are becoming more interested in the cybersecurity agenda, and their increased participation in global processes could put pressure on the leading cyber powers to act more responsibly. 

In the UN Ad Hoc Committee on Cybercrime, whose main goal is to make the first draft of an international convention on cybercrime, countries have made some progress on provisions related to the definitions of cybercrime, procedural measures, law enforcement, and the applicability of international human rights provisions. And while there are many divergent positions, the overall momentum seems promising, and we may hear more good news from Vienna and New York in 2023.

So far, there have been three sessions, and a consolidated negotiating document has been prepared by the committee Chair with the support of the Secretariat. The document is a compilation of states’ proposals regarding the general provisions, criminalisation, procedural measures, and law enforcement of the draft convention.

A second consolidated negotiating document will be prepared in 2023, based on the outcomes of the committee’s third session regarding international cooperation, technical assistance, preventive measures, mechanism of implementation, and final provisions of the convention. Basically, these combined documents could be used as a starting point for member states to write the convention, which is expected to be presented to the UN General Assembly (UNGA) at its 78th session in September 2023.

One of the main debates that is expected to take place before the finalisation of the draft convention is the criminalisation of offences. In brief, one group of states is proposing that the convention is limited to criminalising cyber-enabled and cyber-dependent crimes, while a second group wants to expand the convention’s competence to other offences, including cyberterrorism. If this debate turns into an impasse, states could either agree to go with a limited scope and leave room for further negotiation down the line, or to extend its scope through an optional protocol.  

Another issue is the protection of human rights and fundamental freedoms. Human rights organisations, such as Human Rights Watch, raised concerns over the protection of human rights when countering cybercrime, and are calling for more efforts to ensure their effective protection.

The UN Open Ended Working Group (OEWG) on cybersecurity is a horse of a different colour, which has also made good progress on its mandate. The OEWG, which is half-way through its five-year mandate, has a busy calendar in 2023, with two substantive sessions, more informal consultations on a Points of Contact (PoC) directory, and another annual progress report. 

Another process in the spotlight will be the Programme of Action (PoA), a UN-driven action-oriented mechanism envisioned to provide concrete support for the implementation of agreed cyber norms. The UN General Assembly First Committee declaration of 5 November 2022 on PoA on cybersecurity made the establishment of the PoA a reality. However, its scope, structure, and content are all up for discussion which will intensify in 2023 ahead of 2025 when PoA is supposed to start following conclusion fo the work of the OEWG (2021-2025). 

What will be cybersecurity developments in 2023? The answer by ChatGPT is….

In 2023, we can expect to see a continued focus on the development of artificial intelligence (AI) and machine learning (ML) technologies to help detect and prevent cyberattacks. We can also expect to see an increased emphasis on cloud security, as more organizations move their data and applications to the cloud. Additionally, we can expect to see an increased focus on user authentication and identity management, as well as the development of more secure authentication protocols. Finally, we can expect to see an increased emphasis on data privacy and encryption, as well as the development of new technologies to help protect sensitive data from unauthorized access.

9. Digital economy: Is the bubble about to burst?

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Our first quarterly report for January–March

The digital bubble started bursting with the bankruptcy of the Silicon Valley Bank, job cuts across a myriad of tech companies, and less investment in tech sectors. There are more and more clouds in the digital blue sky of often naive tech developments. Unfortunately, business problems are not just matters of marketing that need fixing. Similar to banks, many tech companies are too big to fail. Critical economic issues are multiplying to be dealt with by regulators and international organisations in multistakeholder and multilateral ways. One positive economic development is the stabilisation of the cryptocurrency market. Bitcoin gained in value from USD 15.342 on 1 January to USD 26.052 on 31 January.  In China, the public reappearance of Jack Ma symbolised the end of intensive policy pressure from Chinese regulators on the digital sector.

What’s ahead of us?

The current trend of job losses and less investment will continue. More cloudy and stormy weather is ahead, creating high uncertainty for businesses. A few trends will particularly impact business. Firstly, it is the uncertainty surrounding the China-USA digital decoupling of two main digital powers, and, even more importantly, its implications in other countries and regions. Secondly, what was a  promising signal at the beginning of the year for investments in AI will change as the AI industry will be under increasing regulatory pressure, heralded by Italy’s ban on ChatGPT. Cybersecurity, data, and content compliance will put a lot of pressure on companies, especially small companies and start-ups. Governments and parliaments will start dealing with the risk of big tech companies being ‘too big to fail’.

A crisis in the digital economy marked the start of the year. Investments were reduced. Jobs in the tech industry were lost. However, the cryptocurrency market has stabilised. Bitcoin even gains some value over the last three months.

What did we predict on the digital economy in January 2023?

The digital economy will face the full brunt of the economic crisis, with a possible recession in 2023. There will be less money for the next big thing – whatever it may be. As investors opt for safe economic options, digital investments are unlikely to be their table of choice.

Bitcoin, often labelled as the new gold, has lost its allure due to the recent failures of cryptocurrencies. The Web 3.0 dynamism has slowed down. Quantum computing is too far on the horizon to make a major economic impact. 

In digital economy governance, the main focus will be on digital trade, data flows, the implementation of the new global tax deal, and the regulation of cryptocurrencies.

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As the economic crisis unfolds worldwide, the digital economy will face the full brunt. Things aren’t looking up for the ‘next big thing’ – there’s not much money around.

With so many daunting prospects for the economy, the governance of the digital economy will focus on three main areas: free trade, data flows, and the implementation of the new global tax deal.

Cryptocurrencies

The beginning of 2023 brought some of the hardest challenges for the cryptocurrency industry. After the December arrest of Sam Bankman-Fried, we predicted a harder regulatory push toward the crypto industry. In February, the US cryptocurrency company Paxos was ordered by the New York Department of financial services (NYDFS) to stop the issuance of the BUSD stablecoin. The BUSD stablecoin was a significant money line for online exchanges as it served as a bridge from the crypto industry to the traditional banking and investment arena. This stablecoin was closely connected to the world’s biggest crypto exchange Binance, which was in the focus of the US regulators again in April when the US Commodity Futures Trading Commission (CFTC) filed a suit against them. The Binance exchange and the company CEO Changpeng Zhao are accused of trading violations. Stablecoin regulation was on the agenda of the G20 Finance Ministers meeting on February 24-25 in India.

They also discussed what we thought would be the focus for 2023, the design and issuing of the Central Bank Digital Currency [CBDC]. The EU is finalising its plans, while the BIS is working with other central banks for the final push. 

After the collapse of Silicon Valley Bank, which was a bank of choice for a large part of the US crypto industry, the colder climate was also announced by the Biden administration. The new 2024 Revenue Proposal in the US will consider the progressive tax on electricity that is used for cryptocurrency mining. We also predict a sharper focus on the requirements and measures for an environmentally responsible industry.  

It is worth noting that in the first three months of 2023, the price of Bitcoin (which is the biggest cryptocurrency) soared by 50%, from $16.000 to $25.000. 

What did we predict on cryptocurrencies in January 2023?

A time of reckoning for cryptocurrency

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The year 2022 delivered two opposite sides of the cryptocurrency hype cycle. After the all-time high values in late 2021, the year 2022 started with a declining trend which proved to be constant throughout the year. 

Currently, bitcoin sits at US$ 16,500, which is an issue for bitcoin miners, as this price is on the edge of the costs of mining. This led one of the largest publicly traded cryptocurrency firms Core Scientific (USA) to file for bankruptcy in December 2022. 

_{Bitcoin price fluctuations over the span of a year.}

The year 2022 will be remembered as a year of major breakdowns for the industry’s big players. It started with the collapse of ‘algorithmic stablecoins’ like Luna, extended to the cryptocurrency landing platforms like Celsius, and finished with a bang: the fall of the third largest cryptocurrency exchange in the world, the FTX.

The FTX exchange, headquartered in the Bahamas, misused more than US$2.5 billion of their customers’ funds, syphoning it to a sister company Almeda Research. This high-profile case raised the concern of regulators worldwide. In 2023, states will continue to adopt digital asset regulations, in particular, related to consumer protection, and the clear involvement of the financial institutions in control of the industry. 

It will certainly be a year of reckoning. The key question will be the one which The Economist posed: Can crypto survive its latest winter?

Digital trade 

The World Trade Organization (WTO) will double down on e-commerce negotiations this year. Here’s why.

In 2019, a subset of WTO members came together to form the Joint Statement Initiative (JSI) on e-commerce. The group of 87 member states are working towards a binding agreement, covering both classical trade topics, such as market access and trade facilitation, as well as digital policy issues, such as data flows and localisation, online privacy, cybersecurity, and spam. Many developing countries, including India and South Africa, are critical of this process. But since the parties negotiating to make up 90% of global trade, any deal made within this framework will have big effects on how e-commerce is regulated around the world.  

During the past few years, JSI negotiators have managed to agree on some topics that could be considered ‘low hanging fruit’, including spam, electronic signatures and authentication, open government data, consumer protection, and transparency.

During the second half of 2022, the JSI co-convenors – Australia, Japan, and Singapore – launched a stocktaking effort to identify proposals that did not attract enough support, encouraging proponents to withdraw them. A new consolidated version of the negotiating text shows that progress still needs to be made in bridging positions on the most controversial issues, such as data flows, data localisation and privacy. This new version is the basis for 2023 negotiations. 

JSI members have a difficult task ahead if they want to produce a new agreement by the end of the year. An alternative option would be to aim for a ‘tiered outcome’, securing a more modest agreement on issues that promote more convergence among participants while continuing negotiations on other issues in 2024 – a solution that will upset those countries that have placed emphasis on the most digital topics in the negotiating agenda, and which perceive these issues as the key to a truly meaningful outcome.

The importance of mainstreaming development aspects of e-commerce is also clear. However, development aspects could remain insufficiently tackled if they are only covered by horizontal and general provisions. Deeper vertical commitments made under specific topics could be a viable option.

While negotiations are still on hold at the WTO, digital trade continues to be regulated by free trade agreements and digital economy agreements, which are mushrooming across the world. The JSI has been seen not only as a breath of fresh air at the WTO, potentially bringing new dynamism to negotiations, but also as a way to counter a growing fragmentation on the digital trade norm landscape.

Implementing the new global tax deal

Celebrated as one of the major deals brokered by the Organisation for Economic Co-operation and Development (OECD), the global tax deal faces a tough test: how to implement it. 

The tax deal, also known as the two-pillar solution (with Pillar I focusing on the reallocation of profits to those countries where there is actual activity, and Pillar II setting a global minimum tax of 15%), has been backed by over 130 countries. 

The negotiations on Pillar II are the most advanced. Countries around the world have been publishing draft proposals and launching national public consultations. In December 2022, the EU finally agreed on a draft directive to implement Pillar II in the EU bloc. This came after almost a year of negotiations, first blocked by Poland, and then blocked by Hungary for six months. The USA has also passed a 15% minimum tax (the Inflation Reduction Act), however it still needs to be refined (or reconciled) with the OECD’s global minimum tax to be fully compliant with Pillar II. So what to expect in 2023? 

These negotiations will continue. The USA has work to do. So does the EU, albeit the major impasse seems to be over now. The ultimate aim is that all countries who agreed to the OECD global tax deal in 2021 will eventually have their legislation in order. With the exception of the handful of countries in the no-camp, corporations will not be able to seek refuge in any tax havens, as most countries will have a minimum of 15% tax rate.

However, since the pillars are tied together, we can also expect that some countries will not want to go all the way on Pillar II before there is enough groundwork on how to implement Pillar I.

The negotiations on Pillar I are also moving forward. One of the main challenges is that the technical discussions are complex  – and lengthy. Pillar I will also require countries to drop their unilateral taxes. But if the process takes too long, especially on the USA side (USA companies will be hit the most by the new global tax rule), countries such as Canada will continue threatening to impose new unilateral taxes, or keep existing ones in place. So what can we expect here?

In 2023, complex negotiations will continue designing Pillar I’s ‘Amount A’ (the new taxing right for jurisdictions over parts of the profits made by multinational companies) and ‘Amount B’ (how to price a company’s baseline marketing and distribution activities). The multilateral convention originally planned to be finalised by mid-2022, is now expected by mid-2023. When it comes to the more advanced Pillar II, the multilateral instrument that will implement parts of the new rules is now also expected to be finalised by mid-2023. 

Meanwhile, the biggest risk is stalled negotiations related to Pillar I, which could jeopardise the implementation of Pillar II. Countries could also continue to propose new unilateral tax rules in the hope that this will speed up Pillar I negotiations. Whatever unilateral rules are proposed, these will have to be temporary until the global OECD rules are implemented.  

There is also an ongoing debate on the impact on developing countries: All of these rules, developing countries say, will favour mostly developed countries, so, there needs to be more incentive for developing countries to implement them. In addition, the rules are too complex. What can we expect here? Major players in the global tax deal debate are the USA and the EU. Developing countries may continue to raise concerns, but they do not have enough leverage to change the rules. Regarding complexity, we can also expect the OECD to try to simplify the implementation of the rules, as it started doing in 2022. It’s a tall order, however – tax rules are inherently complex.  

10. Digital standardisation: Governance through technical means 

Our first quarterly report for January–March

In January, we said that the relevance of digital standards as a ‘soft governance’ approach would increase (in 2023 and beyond). Less than four months later, we’re surely seeing this. As AI has gotten significant attention within policy and regulatory spaces recently, the role of standards in the development of safe AI has also come up in discussions.

Responding to the call for a pause in ‘giant AI experiments’ and for the ‘development of robust AI governance systems’, three major international standard-setting organisations – the IEC, ISO and ITU – stressed that standards can ‘underpin regulatory frameworks and […] provide appropriate guardrails for responsible, safe and trustworthy AI development’. At the EU level, negotiations are advancing on finalising the AI Act, where standards are highlighted as a modality to demonstrate conformity with the act’s legal provisions. CEN, CENELEC and ETSI are already working on such standards. In the UK, the new  white paper on AI regulation notes that ‘ technical standards can provide useful guidance on good practices for AI governance’.

On the relationship between standards and human rights, the Office of the High Commissioner on Human Rights ran a public consultation event and issued a call for contributions to inform the upcoming report that the High Commissioner will present to the Human Rights Council at its 53rd session. And when the World Standards Cooperation leadership (i.e. heads of IEC, ISO and ITU) met in February, the importance of integrating human rights into international standards was one of the key messages.

At the same time, SDOs – nationally and internationally – have continued working on standards for advanced technology, from the US National Institute of Standards and Technology (NIST) having adopted an AI Risk Management Framework to the ITU’s Focus group on the Metaverse having held its first meeting.

Ahead of us

For the rest of the year, we will likely see these dynamics continue. As the debates on the governance of AI and other digital technologies advance, there will be more focus on the contributions of standards as either soft(er) governance tools – in the absence of specific regulations – or as mechanisms to prove compliance with regulations. At the EU level, the probable approval of the AI Act will also mean that the European SDOs will intensify their work on developing relevant standards.

The UN Human Rights Council will discuss interplays between human rights and standardisation processes during its upcoming session, once the High Commissioner presents his report. Building on a trend from previous years, fora and initiatives such as the G7, G20 and the EU-US Trade and Technology Council (TTC) will take more concrete steps to advance cooperation on standards for digital technologies (in the TTC, for instance, this already happens within a dedicated working group on technical standards). And, of course, SDOs and private consortia will keep doing what they know best – developing new standards or updating existing ones. 

What did we predict on digital standardisation in January 2023?

In 2023, the relevance of digital standards as a ‘soft governance’ approach will increase. Standards provide alternatives to the lack of multilateral policy agreements. 

Standards are also practical, useful, and directly relevant for citizens. For example, in 2023, new iPhone users will be able to use standard USB-C for charging iPhones after Apple had to give up its proprietary plug following pressure from the EU. In 2023, the first home devices built around Matter standards will come to the market. Lightbulbs, thermostats, and other internet of things (IoTs) will become interoperable and simpler to use.

The lull in fast tech developments will provide an opportunity to set standards for the future tech growth of AI, the metaverse, and quantum computing, among others. And, continuing trends from previous years, we will most likely see intensified cooperation on digital standardisation issues between certain countries, as well as a stronger interplay between standard-setting and human rights processes.

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Although largely invisible, technical standards are all around us, from the protocols that make the internet work, to the dozens of specifications embedded into our mobile phones. At their core, standards describe how technologies, products, and services are made and how they work. This lets them work together and makes services safer and better.

For instance, one major breakthrough in 2022 was the Connectivity Standards Alliance adoption of Matter, a standard for interoperability between smart home devices. Supported by tech giants Apple, Amazon, Google, and Samsung, the new Matter standard is expected to increase the security of home devices. In the words of president and CEO of the Connectivity Standards Alliance Tobin Richards: ‘Matter also raises the bar for security, using blockchain to validate and store credentials on the home network, encrypting messages (commands) between devices, enabling local control (no cloud), and including a pathway to easy security updates’. 

Beyond their technical nature, standards also have economic, social, and (geo)political dimensions. This multifaceted nature of standards has become increasingly visible in recent years. For instance, standards made it on the agenda of bilateral and multilateral intergovernmental frameworks such as the G7, G20, the Quad (Australia, India, Japan, the USA), and the EU-US Trade and Technology Council. They have also been discussed in unusual settings, such as the UN Human Rights Council. 

What can we expect to see in 2023?

Relevance of standards: From strength to strength

We can expect standards and standardisation processes to continue to increase in relevance in 2023 and beyond, in particular against the backdrop of intensifying technological competition between nations. Like-minded countries will likely work to strengthen cooperation and coordination on standards-related matters, in particular when it comes to the development of standards for emerging and advanced technologies. The EU-US Trade and Technology Council is just one example: building on agreements reached in 2022, the EU and the USA will work to increase standards cooperation and advance the development of international standards in areas such as quantum information science and technology, additive manufacturing, post-quantum encryption, and IoTs. 

A growing relationship with human rights

Another trend picking up in 2023 will be the nexus between human rights and digital standards. To start with, the Office of the High Commissioner on Human Rights will deliver its report to the UN Human Rights Council on ‘the relationship between human rights and technical standard-setting processes for new and emerging digital technologies’, as requested by the council in a June 2021 resolution. The report is likely to include recommendations on fostering more convergences between human rights and standardisation processes, as well as on strengthening the participation of civil society groups in standard-setting work. Then, within standards developing organisations (SDOs) themselves, there will likely be more and more discussions on the human rights implications of the standards under development, for instance, when it comes to AI, IoT, digital identities, and more. 

Standards as de facto governance tools

Standards are, in general, voluntary, and their success depends to the extent they are taken up by the industry. But sometimes, there are also clear links between standards and regulations: Standards can serve as the basis for regulation or can be used as regulatory tools themselves when they are made compulsory by law. The nexus between standards, regulations, and overall digital transformation is illustrated, for instance, by the upcoming 7th Cybersecurity Standardisation Conference in Brussels on 7 February, which will discuss standardisation as a way of supporting the EU’s cybersecurity-related laws such as the Cyber Resilience Act. 

As regulation tends to lag behind technological progress, standards have an important role to play in ensuring the quality, safety, and security for technologies that are not yet covered by regulations. Moreover, as current geopolitical tensions are poised to reduce the chances for multilateral digital governance solutions, internationally-agreed digital standards could fill in this void by becoming de facto governance tools. 

New standards in the making 

While we expect some of the hype around advanced/emerging technologies (quantum computing, the metaverse, etc.) to tone down, standardisation processes will accelerate. For example, work on various standards for quantum computing and quantum communication will advance within bodies such as ITU, the International Organization for Standardization (ISO), and the International Electrotechnical Commission (IEC). When it comes to standardisation activities for quantum-safe cryptography, such work is also being carried out by national and regional SDOs such as the National Institute of Standards and Technology (NIST) in the USA and the European Telecommunications Standards Institute (ETSI) in the EU. 

A few standardisation initiatives are emerging in order to ensure the future interoperability of metaverse platforms. The most prominent is the Metaverse Standards Forum supported by major tech companies. Also noteworthy is the pre-standardisation work on metaverse initiated at the ITU in December 2022. Similar pre-standardisation work, this time in relation to mobile networks, is gaining momentum at ETSI, where an industry specification group has started exploring use cases and frequency band requirements for terahertz (THz) communications, which is a candidate technology for 6G networks.

How will digital standardisation develop in 2023? The answer by ChatGPT is….

How will digital standardisation develop in 2023? Digital standardisation is expected to continue to evolve in 2023, as more organizations adopt digital technologies and processes. This will likely include the development of new standards for data exchange, security, and interoperability. Additionally, the use of artificial intelligence (AI) and machine learning (ML) will become more commonplace, allowing for more efficient and accurate data processing. Finally, the use of blockchain technology is expected to become more widespread, allowing for secure and transparent data sharing between organizations.

11. Data governance: Moving away from a one-size-fits-all approach

Here are predictions on data governance from January 2023.

As discussions on data governance mature, 2023 will see a departure from the one-size-fits-all approach towards conversations on how to regulate the different types of data, such as personal, corporate, public, health, etc. In parallel, this will require a holistic approach that takes into account the standardisation, security, human rights, and legal perspectives.  

For governments worldwide, 2023 could be a landmark year in their search on how to reconcile two aspects: 

• The need to ascertain sovereignty over critical and sensitive data that needs to be stored physically on national territories (registries, health data, etc.)
• The fact that free flow of data across national and corporate borders facilitates economic development and contributes to the public good (e.g. environmental data)

Win-win solutions are of course ideal, but realistically, governments will have to make optimal trade-offs between the two.

In 2023, data will be prominent on the development and trade agenda. India has put data and development high on the Agenda of India’s G20 presidency this year. Data will also be a central theme in e-commerce plurilateral negotiations at the WTO. Most likely, Japan – as a promoter of the free flow of data – will also try to put data high on the agenda of the IGF, which will be hosted in Kyoto, Japan in October 2023. 

So what can we expect these discussions to focus on? There are at least four main policy questions that these forums, as well as other national and regional spaces, are expected to tackle.

How to develop and apply adequate and appropriate regulation to specific types of data

We tend to group all kinds of data into one basket, but in reality, there are different kinds of data – from personal data to sector-specific and open data – all of which need a dedicated data governance approach. 

In 2023, data governance will mature with the realisation that we need as many governance approaches as there are types of data. Thus, the way we govern personal data needs to be different from the way we tackle scientific, business, or communal data. 

This realisation will be gradual and will be initiated in organisations and systems that manage specific data (e.g. World Health Organization for health data, World Meteorological Organization for weather and climate data, etc.). 

How to address data governance issues in multidisciplinary ways

In 2023, countries, companies, and international organisations will have to address the multidisciplinary nature of data governance in holistic ways. It will require organisational, procedural, and practical changes in order to address the following levels of data governance:

• At the technical level, data needs standards in order to be interoperable. Here, the work of standardisation and technical bodies becomes essential. 
• At the security level, data is subject to many breaches. Data security is at the centre of activities of the tech industry and governments worldwide. 
• At the economic level, the internet business model is based on data. The role of tech companies which process user data, and the role of authorities to ensure users and their data are protected, come into play.
• At the legal and human rights level, the main issue pertains to the protection of users’ rights, including the right to privacy and data protection as well as protection from mass surveillance. Since rules are anchored in geographical spaces, jurisdiction is often the main issue that arises in disputes. Courts have increasingly become de facto rule-makers. Civil society plays an important role in advocating for users’ rights.

How to incorporate data governance into traditional policy fields and practices

As data becomes critical for all fields of global cooperation, international organisations will need to intensify the use of data in their activities in 2023, be it health, migration, or trade. Increasing their reliance on data will contribute to more evidence-based policymaking. 

At the same time, the growing relevance of data will also make data governance more political. As has already been happening in the health sector, countries will need to negotiate what type of data they are willing to share with international organisations and how this data will be used. 

How data regulation will likely affect the use and development of AI

AI is built on data, which means that data governance and AI governance go hand in hand. Emerging AI applications such as ChatGPT will trigger more discussions on the deeply-rooted relationship between the two. 

12. The future of work: Hybrid is the new normal

The year 2022 brought us a revanche of meetings as people reconnected in physical spaces and meetings worldwide. In 2023, work and negotiations will ‘settle’ to a hybrid format, combining online and in situ interaction elements. In addition to Zoom and online meetings, new virtual reality tools will be developed to facilitate seamless online interaction. The focus will be on new routines, procedures, and regulations for hybrid interaction, from regular work to diplomatic negotiations.

The shift to an online way of doing things had long been coming. Companies had already begun slowly experimenting with new work-from-home practices, perhaps once a month, maybe once a week. Employees rejoiced, but managers treaded carefully.

In 2020, the Covid-19 pandemic changed everything. Workplaces were encouraged to shift to online work almost overnight. Employees set up shop in their living rooms. Zoom’s profits skyrocketed. 

As the pandemic began to release the world from its grip, the hybrid way of working and meeting (a mix of working face-to-face from the office, and online from home) emerged as the new norm. With it came a new set of policy considerations:

• How are online meeting tools handling the personal data of users, especially children, who have had to start making use of virtual classrooms?
• What are the risks and negative effects of surveilling performance (if companies really need to)?
• How should governments tackle the status of gig workers, a sector which exploded during the pandemic due to the high demand for the service, and the flexibility it offers?