Editor   05 Feb 2019   Diplo Blog

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Populism is spreading. The global economy is more fragile. A trade war between the USA and China is under way. And tech companies are arousing growing angst. This is how The Economist has described the start of 2019.

The digital realm is mirroring these societal developments. Cyber risks and uncertainties are growing. A cyber-arms race is in the making. Opportunity-wise, artificial intelligence (AI), quantum computing, and blockchain are spearheading a wave of new applications in health, agriculture, and development.

In 2019, the digital realpolitik trend will accelerate. A ‘digital G2’ with China and the USA is emerging with all leading digital companies being based in these two countries. The distance between the two digital giants ‒ from infrastructural issues related to Chinese or US hardware (including the Huawei controversy) to the choice of tech platforms ‒ is shrinking. 

As French President Emmanuel Macron said at the 2018 Internet Governance Forum (IGF) in Paris, Europe is trying to find a digital third way by relying on strong data protection rules [through the General Data Protection Regulation (GDPR)]; by opening up space for the EU’s digital industry [mainly small and medium enterprises (SMEs)] through anti-monopoly regulations that mostly target  tech giants; and through ‘innovative multilateralism’ on the international scale.

In Africa, where the digital realm provides many opportunities for leapfrogging, the region is increasingly sandwiched between the China-US global digital competition. Digital questions are climbing the agendas of the African Union Commission and of African leaders.

India is building momentum on the success of Aadhar digital identity system, which is accelerating digital developments within the country and creating an international following. With regard to data, the country is trying to strike an optimal balance between preserving its users’ data on Indian soil and ensuring that data policy does not damage the local tech industry, which is deeply integrated in the global data-driven system.

Russia is moving towards more digital sovereignty, requesting tech giants to store the data of Russian users on data centres in Russia. A new digital bill proposes the creation of Runet, a Russian Internet infrastructure that could operate independently of the rest of the Internet.

Other countries are in a digital soul-searching mode, trying to find their position in this fast-changing environment. For many of them, in particular small countries, international solutions remain the best way to promote and protect their digital interests.

However, there is a very little appetite for multilateral solutions. This year will be marked by major divisions. In e-commerce, mainly countries from the Organisation for Economic Co-Operation and Development (OECD) have agreed to negotiate e-commerce rules in the World Trade Organization (WTO), while others, mainly developing countries, oppose these negotiations. In cybersecurity, there are two processes: the new UN Group of Governmental Experts (UN GGE), led by the USA; and Open-ended Working Group, led by Russia. There many overlaps between two processes, and a major difference concerning the drafting of the new rules for cyberspace which Russia argues in favour of and the USA opposes.

In the search for new solutions in the digital field, the UN Secretary General established the UN High-Level Panel on Digital Cooperation which will submit its report and recommendations in May this year.

Anniversaries offer an opportunity to reflect on the past and to look to the future. In 2019, three important anniversaries for the digital world will be celebrated: 100 years of the International Labour Organization (ILO), which will focus on the future of work; 70 years of NATO, which will feature cybersecurity prominently; and 30 years of the World Wide Web, which will be celebrated in March, and where Sir Tim Berners Lee is expected to further develop the idea of a ‘Contract for the Web’.

This year will be also marked by many academic, research, and policy initiatives proposing solutions for dealing with current digital issues such as cybersecurity, and long-term issues such as the impact of AI on humanity, summarised as Internet Governance Knowledge Factories.

The following are Diplo’s 10 predictions of what will mark digital politics in 2019.

This crystal ball exercise follows the tradition initiated and delivered every year by DiploFoundation’s founding director Dr Jovan Kurbalija (see last year’s predictions). Since he is currently serving as the Executive Co-Director of the UN High-Level Panel on Digital Cooperation, the 2019 predictions have been prepared by Diplo’s team of digital policy researchers.


The 10 digital policy predictions for 2019

1. Data governance: Discussions will mature amid tensions
2. Digital geo-economics: The race for tech dominance will continue
3. Geo-politics: A security and cyber-arms race in the making
4. Artificial intelligence: Maturing beyond hype 
5. Security will be omnipresent
6. Tech companies: The dawn of government regulation
7. Global e-commerce rules will hang in the balance
8. Hardware is back
9. Blockchain and cryptocurrencies: A year of reckoning
10. Digital identities will catch on


1. Data governance: Discussions will mature amid tensions

Data continues to oil the modern economy. In Europe alone, it is estimated that the value of the data economy may increase to €739 billion by 2020 (from €285 billion in 2015), representing 4% of the overall EU GDP. The relevance of data increases in security and global geo-economics.

The contentious issues surrounding cross-border data rules will intensify. Policymakers will continue their quest for data governance solutions that balance the needs of the private sector with the rights of users and the responsibility of law enforcement. They will also need to answer challenging questions. How will they respond to data privacy and data security issues, and the more complex (data-based) business models of companies? We tackle many of these issues further down; the issues emerge in most of our predictions. 


Cross-border data flows

The issue of cross-border data flow will find a new forum for discussion in 2019, as 75 countries ‒ including the EU, USA, Japan, and China ‒ agreed to start WTO negotiations for a new set of global e-commerce rules as of March. Later in June, Japan’s Prime Minister will use the G20 chairmanship to push the data governance track under the WTO’s auspices: ‘I would like Osaka G20 to be long remembered as the summit that started worldwide data governance. Let Osaka G20 set in train a new track for looking at data governance ‒ call it the Osaka Track ‒ under the roof of the WTO.’ This announcement has triggered a wide range of reactions, including criticism from civil society over the absence of development aspects in e-commerce negotiations, and the risk that trade negotiations, through a focus on data, can have an impact on the broader digital governance of human rights, security, and standardisation.


A variety of national data regulation

There is a wide variety of data available. Typically, the data discussion focuses on personal data (in the EU, this is protected by the GDPR). Other data which flows via Internet cables include business, scientific, and weather data. There is also data of vital relevance for national security and the functioning of governments, such as population registries, land registries, identity databases, business registers, etc.

This variety of data will be increasingly reflected in data regulation worldwide. For example, security data is likely to be kept under national jurisdictions, while business and scientific data will flow easier across national borders. This varied, granular data regulation will bring more maturity in data politics worldwide.


A variety of tech companies’ approaches to data

In 2019, the trend of diversification of data policies of the major tech companies will continue. The more their business models depend on data, the more they are against data regulation. This is case of, for example, Facebook and Google, which heavily depend on data.

On the other side of the spectrum, companies like Apple still generate more revenue from hardware and software than from the mining of user data. Thus, it was not surprising that Apple’s CEO strongly endorsed the EU’s GDPR and asked for a similar data regulation in the USA.


User consent: the next battle for data

User consent is an important cornerstone of the EU’s GDPR, which entered into force in May 2018. The new law has set higher standards of data protection in Europe and beyond, and has prompted other countries to follow a similar approach. Whereas 2018 was the year in which companies updated their business practices to become GDPR-ready, this year will see the implementation of the new law.

Already in January, the French National Commission on Informatics and Liberty (CNIL) fined Google for failing to validly obtain user consent for ad personalisation, and for providing information on data usage that was ‘not easily accessible’ and ‘not always clear nor comprehensive’. The €50 million fine is the first punitive measure under the GDPR against a US tech company; it will not be the last.

2. Digital geo-economics: The race for tech dominance will continue

The China‒US trade war dominated many headlines in 2018. Although much of the focus is on the US bilateral goods trade deficit (US imports from China are larger than its exports to the country), the USA accused China of misappropriating foreign technology (foreign companies are obliged to provide strategic technology to joint venture partners in order to access the market), stealing intellectual property, and subsidising Chinese industries.

Cyber-espionage is not a new issue. In 2015, the USA and China agreed not to knowingly support cyber-espionage against the corporate sector. At the time, the US President spoke of the country’s readiness to impose sanctions against cyber criminals, while the Chinese President denied the involvement of his government in espionage incidents and invited the issue to be de-politicised and addressed through bilateral co-operation. Since then, both countries have accused each other of cyber-espionage. The latest accusation came in December 2018, when the US Justice Department indicted Chinese hackers for conducting state-backed hacking of US tech companies and government departments.

Behind these tensions are both countries’ ambitious plans in tech sector. Trump’s pledge to ‘make America great again’ runs parallel to President Xi’s ‘Made in China 2025’, the country’s aim to replace hi-tech economies and become a self-sufficient tech superpower. At the same time, the size of the Chinese market is too big an opportunity for US companies to miss. In addition, giant tech companies in both countries are vying for emerging markets in Asia and Africa. Both countries have tried to beef up their national champions in the tech sector, and some European leaders are inclined to follow their lead, calling for EU competition guidelines to be modernised so that European titans can emerge. These developments could lead to more state influence over firms and impact competition in the digital economy worldwide.

The end of the year has shown that the trade war is set to continue through to this year. For the time being, however, the escalation has stopped. In December 2018, the two presidents agreed to halt new trade tariffs for 90 days to allow for talks. China agreed to increase its purchases from the USA, while both sides agreed to negotiate changes to forced technology transfer, intellectual property protection, non-tariff barriers, cyber intrusions, and cyber theft. All eyes will be on talks between the two countries in the coming weeks.

3. Geo-politics: A security and cyber-arms race in the making

The cyber arms-race will accelerate in 2019. Countries will continue to flex their cyber muscles. Security firm FireEye believes that ‘In 2019 and beyond, we [can] expect to see more nations developing offensive cyber capabilities. [The] cyber arms race in [the] making is triggered by countries’ fear to be left behind. Our analysis shows that most developed countries have already developed offensive capabilities, and are able to pre-emptively manipulate, disrupt, or destroy information systems or networks in other countries, with damaging effects.’

While the militarisation of cyberspace will continue, it will also become more ‘official’ and transparent (or, rather, translucent), as states ‒ in particular Western countries ‒ start openly introducing cyber capabilities to their military and defence doctrines. The main issue is: Where does one draw the line with armament and the use of cyber-capabilities?

Most notably in 2018, the USA and Britain both stepped up their cyber operations. The USA released two cyber strategies (the White House’s strategy and the Department of Defense’s strategy), advancing a more aggressive stance against malicious cyber activity, and positioning its economic and security interests very closely together. Britain announced the creation of a £250 million joint cyber force between its Ministry of Defence and the government’s intelligence arm, the Government Communications Headquarters (GCHQ). Russia has also launched cyber operations that are more aggressive than in the past.


Cybersecurity on the UN agenda

Within the UN framework, the UN GGE has been the main way to address cybersecurity issues. Norms of responsible state behaviour have been outlined; the next step is to consider how they can be implemented. Two resolutions passed in the UN General Assembly in late 2018 promise to develop these rules further.

The first resolution, proposed by Russia, reiterates (with some amendments) the norms and principles of responsible state behaviour in cyberspace outlined in the UN GGE 2013 and 2015 reports, and calls for the establishment of an Open-ended Working Group to further develop these norms and the ways for their implementation, on a consensus basis.

The second resolution, proposed by the USA, underlines the reports of the UN GGE and calls for the establishment of another GGE (with limited participation, based on ‘equitable geographical distribution’), mandated to further study norms, rules, and principles of responsible state behaviour; confidence-building and capacity-building measures; and how international law applies to the use of ICTs by states. The work is expected to start in 2019. The existing geopolitical rift in the positions of key states will, however, impact the success of these processes as well.


Other cybersecurity processes

Nevertheless, a number of other ‒ mainly multistakeholder ‒ forums will contribute to the process by enabling the  much-needed informal dialogue (known as ‘track 2’, connecting non-state actors of the countries, and ‘track 1.5’, involving also state representatives): the Paris Call for Trust and Security in Cyberspace will be revisited at the IGF in Berlin; the Global Commission on Stability of Cyberspace will work on new proposals for norms but also look into how to place them into the process; the continuation of the Geneva Dialogue on Responsible Behaviour in Cyberspace may help defining roles and responsibilities of stakeholders; and Microsoft’s Digital Peace Now initiative may put additional pressure to the process to deliver results.

In the meantime, cyber intrusions and subversions under the threshold of armed attack (such as stealing sensitive information, undermining economies through widespread disruptive malware, or undermining trust in democratic institutions) will likely increase; so will the open attributions and accusations, particularly of Western countries against Russia, China, North Korea, and Iran. The lack of clear evidence for attribution may, however, bring about co-operation in establishing certain common and transparent mechanisms and methodologies for attribution, even if unofficially. 

4. Artificial intelligence: Maturing beyond hype

AI technology offers enormous potential to transform our lives, and facilitate everyday choices. Last year’s developments, such as IBM’s Project Debater which can engage in reasoned arguments with humans on complex topics, continued to push the boundaries. Research firm Gartner has identified ‘autonomous things’ as the top strategic technology trend for 2019.

AI will mature and move beyond the hype. As the Gartner Hype Cycle shows, most AI-related technologies are either close to the peak of inflated expectations (brain‒computer interface, autonomous mobile, and smart robots), or have already moved down towards the disillusionment phase (deep learning, virtual assistant, and autonomous driving).

 

 

So far, in fact, developments have been largely surrounded by a lot of hype. They were viewed with the same awe triggered by science fiction literature and movies. Popular culture imagines the advent of singularity, where society heads towards ‘artificial general intelligence’, still a distinct capability.

But a deeper understanding of the technology will help users and policymakers realise that AI is already around us, and can help deflate the hype. AI and algorithms power online searches (influencing the way we perceive things), and retail platforms (influencing our purchases). They are behind translation and voice recognition software (voice-enabled gadgets made an impact at this year’s Consumer Electronics Show), and now the complex facial recognition systems. The disruption to jobs has already started

DiploFoundation’s course on AI and Diplomacy targeting policymakers will launch in June.


AI governance

This maturity phase permeates into policy spheres. As The Economist indicated, the AI governance discussion should be anchored in existing policy issues, such as privacy and security. The Special Rapporteur on freedom of expression also believes that existing law and regulation could be flexible and available without the need to legislate further.

AI issues were the spirit of discussion at the 2018 IGF, where French President Emmanuel Macron announced the proposal to establish the International Panel for AI (an ‘IPCC for AI’), which is expected to be created during the French Presidency of the G7 in 2019. The issues are also being tackled by the EU’s High-Level Expert Group on Artificial Intelligence (AI HLEG) and the Council of Europe’s Committee of Experts on Human Rights Dimensions of Automated Data Processing and Different Forms of Artificial Intelligence (MSI-AUT), whose work continues this year. The UN Group of Governmental Experts on Lethal Autonomous Weapons Systems will also continue its work by discussing a possible legally-binding instrument, and a moratorium on the development of LAWS.

Diplo’s latest study, Mapping the challenges and opportunities of artificial intelligence for the conduct of diplomacy, shows that the rapid succession of publications of national AI strategies over the last two years was described as ‘the race to become the global leader in artificial intelligence’. While this competitive perspective is definitely not reflected in all of the strategies, many of them aim at leadership in the field. On the national level, we can thus expect more countries to create national AI strategies.


Towards the future of work

A clearer understanding of AI can help policymakers and businesses take action more quickly on the future of work strategies, which is set to become a more prominent issue as automation increases. Despite sprouting national strategies, AI-related skills are in short supply globally. Within a few years, as much as 14% of the global workforce will have to change jobs and acquire new skills due to the disruption caused by automation. This profound change will require updating educational curricula, and the re-skilling and up-skilling of workers. (See more recommendations from the ILO’s report and Diplo’s study on Digital Literacy for Digital Natives.)

Who should take the lead on the future of work? Governments ‒ who were notably fewer at this year’s World Economic Focus which discussed the impact of the fourth industrial revolution ‒ are the most obvious answer. Some businesses, however, say that it is the private sector which should lead on. However, the New York Times argues that businesses see automation as a way of saving on costs to employ workers, with limited concern about the social cost of automation and the loss of jobs. 


Autonomous vehicles

One area which will continue to develop and which will help AI become more mainstream is autonomous cars. Last year’s Gartner curve showed that autonomous driving level 4 ‒ that is, a fully autonomous car which can handle the majority of situations without the need for human intervention ‒ is already past the hype peak. In 2019, Waymo (Alphabet’s autonomous-driving subsidiary) and General Motors will both test driverless cars on public roads in geo-fenced areas. Tesla is even more ambitious, and plans to launch full self-driving vehicles ahead of anyone else.

In turn, security issues will become more prominent. Last year’s fatal incident in Arizona halted the testing of autonomous vehicles and triggered concerns across countries intent on introducing the technology in the next few years. As the prevalence of autonomous vehicles on public roads increases, so could the likelihood of accidents. 

On the international level, the United Nations Economic Commission for Europe (UN ECE) is leading the discussion on autonomous vehicles and driving. In March 2019, the Geneva Car Show will include a series of events addressing the regulatory aspect of autonomous vehicles.


Liability and AI

‘How will we ensure that AI systems are not harmful to society’ was one of the underlying questions during the 2018 IGF. This is likely to remain one of the main themes in 2019. One of the issues which will resurface is the question of liability of autonomous systems (such as robots and vehicles).

Closely connected is the issue of legal personality of robots, which last year divided parliamentarians and AI experts. While parliamentarians in the EU suggested the creation of 'a specific legal status for robots', over 150 AI experts raised concerns over the proposal’s inappropriateness.

5. Security will be omnipresent

Tech is everywhere, and more and more businesses and sectors ‒ including in developing countries ‒ are becoming completely dependent on their IT infrastructures. The security of IT infrastructures and data is a critical factor for many industries. This will make security considerations paramount for every industry, feeding a fast-growing market for cyber-insurance. As users acquire more smart gadgets, IoT security will also need to be given closer attention. Of particular importance will be to bring the ‘smart equipment’ industries ‒ autonomous cars, IoT, connected health solutions, etc. ‒ closer to processes which discuss security standards, such as the Charter of Trust for a Secure Digital World and the Global Forum on Cyber Expertise.

Statistics, however, are not promising. The number of security incidents, already high in previous years, continued to increase in 2018. The largest was Marriott International’s data breach, where hackers breached the reservation system and stole the personal data of up to 500 million guests. In 2019, the threat landscape will continue to innovate with new forms of malware, especially targeting rather insecure connected smart devices; innovations in defence solutions and approaches will flourish as well. It is expected that companies will take security even more seriously, and that smaller companies will enlist the same approaches as larger players

While cyber-insurance schemes may boost the implementation of high standards, particularly for larger companies, the limited offer of the schemes will have reduced effects. We can expect stronger national regulation for higher security standards to be proposed; however, policies to support the private sector ‒ in particular SMEs and critical infrastructure ‒ in improving their cybersecurity competencies (such as the US NIST Framework or the UK Cyber Essentials) will also have to be put in place in order to achieve improvements.

One of the main issues is that deterrence for cyber-attacks is not strong enough. The dark web is still largely unpatrolled; law enforcement agencies (LEAs) struggle with a lack of resources; and cybercriminals get away with their wrong-doings, partly due to the veil of anonymity. Co-operation between LEAs and the private sector in accessing and processing evidence is still generally slow and inefficient, without clear policy proposals for improvement. What price will society have to pay before cyberspace becomes a safer space? Could Russia’s proposal for a new cybercrime convention, adopted at the UN at the end of 2018, bring more progress than the Council of Europe’s Budapest Convention has already brought through improved harmonisation of national legislations, and capacity building of LEAs?


Surveillance technology

As cybercrime rates increase, governments will apply more pressure for lawful access to data, especially backdoor access, to help LEAs in the course of their investigations. The Five Eyes countries ‒ Australia, Canada, New Zealand, the UK, and the USA ‒ clearly stated that encryption poses a problem for intelligence services and LEAs to lawfully access data and communications. By the end of the year, Australia had passed its anti-encryption bill ‒ heavily criticised by the private sector and civil society ‒ that gives LEAs the power to force companies operating in the country to hack, implant malware, undermine encryption, or insert backdoors.

Advances in facial recognition technologies will become more visible in practice. So far, it has been met with concerns over inaccuracy and bias, and its negative impact on the right to privacy. However, this did not stop airports, schools, and online tech companies from introducing it. At the World Economic Forum in Davos, Microsoft’s Chief Executive called for government regulation, indicating that self-regulation might not be enough to deal with the issues.  

In the development of new rules for surveillance technology, the counter-arguments that typically pit cybersecurity against privacy issues are likely to persist. The question of anonymity on the Internet will also likely to resurface.

6. Tech companies: The dawn of government regulation

In 2018, seven of the ten most valuable companies by market capitalisation came from the digital  industry (Amazon, Apple, Google, Facebook, Microsoft, Alibaba, Tencent). Apple and Amazon became the world’s first trillion-dollar public companies ‒ unprecedented for a tech company. The size, market power, and influence of giant companies have made policymakers (especially in the EU) very uncomfortable. The problems are various: tech companies have amassed too much data and they continue to require more; once data is in their possession, it is often breached; illegal content is rife on their platforms; and profit-shifting to low-tax jurisdictions have made things worse.

For some of these problems, tech companies have admitted that self-regulation is no longer sufficient. Apple’s CEO praised the GDPR and called for a similar approach in the USA. Microsoft’s CEO called for new legislation for face recognition technology

2018 ushered in a new wave of government regulation. In the EU, countries started to enact unilateral rules for taxing Internet companies. Germany’s NetzDG requires Internet platforms with more than two million users to proactively report and delete illegal content, and fines them for non-compliance. Elsewhere, the number of data localisation laws, requiring data to be stored on local servers, have mushroomed. Arguments for antitrust litigation to split some of the giant companies are picking up in the USA. The French President called for ‘a new multilateralism both suited to the reality of cyber space and effective’.

The call for government regulation was clear during this year’s World Economic Forum. Among them were the German Chancellor who said that some of the major issues will require more international co-operation. The South African Premier is in support of ‘an overarching body that’ll set standards on a whole range of things’. Greater oversight of the tech sector will be discussed by African Union leaders when they meet in February in Addis Ababa.

The main question is whether countries will agree on global rules, or will go at it alone. As the trend from 2018 showed, more and more countries are taking action unilaterally, bilaterally, and regionally.

7. Global e-commerce rules will hang in the balance

After years of failed attempts to start WTO negotiations on a set of e-commerce rules, over 70 countries agreed to start the talks in March. It will not be smooth sailing, as strong divergences already exist between some of the countries, notably when it comes to regulating cross-border data flows and the possibility of introducing national policies aimed at more evenly distributing the benefits of the digital economy.

According to a report published by the UN Conference on Trade and Development (UNCTAD), trade is increasingly concentrated in the hands of big firms, and this will contribute to more social inequality in the future. The World Economic Forum’s Global Competitiveness Report 2018, warns that the fourth industrial revolution ‘makes the pathway to development less certain’, and suggests that ‘redistributive policies, safety nets, investments in human capital, and more progressive taxation could help reduce inequality without compromising a country’s level of competitiveness’.

Against this background, some developing countries and civil society organisations oppose starting e-commerce negotiations at the WTO, assessing that new rules would hinder the introduction of national policies to support digital industrialisation of developing countries and least developed countries.

From a regulatory perspective, the relevance of global rules will depend on how fast countries will manage to pen a WTO agreement. While WTO member states grapple with negotiations, regional deals will continue to exert control over trade and investment, impacting e-commerce. The USA has struck a new deal with the United States-Mexico-Canada agreement (USMCA); China is backing several regional initiatives. Regional blocs are demarcating their boundaries with new rules, such as Europe’s GDPR. The proposed tax rules in Europe are still in the pipeline, despite a setback in December. Trade in Asia and Europe is already predominantly intra-regional; Asian companies made more foreign sales within Asia than in the USA in 2017. All this has led to ‘slowbalisation’, a term adapted by The Economist to describe the slowing down of globalisation. Geography, once again, matters, and the number of regional and bilateral agreements will continue to increase.

8. Hardware is back

For some  time, hardware was absent from digital policy. The focus was more on ICANN, software, and data. In 2018, a few incidents (such as the Huawei controversy) reminded us that the virtual world relies on hardware, including microchips for processing information, servers for storing data, and cables or wi-fi for carrying Internet traffic. In 2019, we can expect a more back-to-basics focus on hardware and the core digital infrastructure.

The most powerful impact will be produced by a combination of these technologies. For example, granular microchips will empower sensors and IoT devices which will become smart devices on the ‘edges’ of the network. 5G will facilitate a fast and reliable exchange of data which will, in combination with microchips and sensors, create a new generation of applications in areas such as medical devices. 


Microchips

‘If data are the new oil, chips are the internal-combustion engines that turn them into something useful’ is how The Economist explained the high relevance of microchips in the modern economy. Microchips can be found everywhere from our mobile phones to robots and airplanes. The geo-economic power of microchips was illustrated in 2018 when the US administration banned the sale of microchips to Chinese phone maker ZTE. ZTE avoided bankruptcy when President Trump lifted the ban in July 2018.

Besides the economic aspects of production, a main concern is possible critical vulnerabilities, like those discovered in 2018 in the processor chips made by lead vendors. Or even the deliberate insertion of ‘backdoors’ by vendors themselves into the hardware design, which would allow third parties to access data managed by processors at the most basic level of hardware, thereby avoiding all application-level and network-level security safeguards.

In 2019, we can expect more microchips geopolitics, especially between the USA and China. Given the high relevance of microchips, there will be a growing push for self-reliance on domestic production. The EU, China, Russia, India, and other countries with aspirations of playing an important role in digital geopolitics will start developing microchips locally. For example, by 2030, China plans to have a completely domestic production of microchips. Currently, China produces only a third of its needs while the rest is imported mainly from the USA.


Sensors and the IoT

Sensors are the main technological interface between the physical and digital worlds. Weather sensors or digital implants in our bodies convert information from weather temperature to hormonal levels into digital data. Sensors are particularly relevant for the fast growth of the IoT. In 2019, we can expect more discussions on standardisation and security of sensors and IoT devices.


5G networks

Deployment of 5G networks, the next generation of wireless technology, will accelerate in 2019. The higher capacity and greater speed of 5G networks will have cascading effects on the development of a new applications and innovative IoT systems. For example, medical devices that depend on fast and reliable networking will get a boost with 5G.

5G will face limitations in the saturation of lower frequencies which are used by mobile networks and devices. The question of spectrum for new technologies will be discussed during the World Radiocommunication Conference in Sharm el-Sheikh (28 October - 22 November 2019). The growing politicisation of the hardware industry will affect development of 5G equipment. For example, the deployment of Huawei’s 5G equipment is already blocked the USA, the UK, and a few other countries.


Quantum computing

In 2019, quantum computing will gain momentum and possible applications in AI, chemistry, and cryptanalysis. The USA and China are at the forefront of research into quantum computing. Alibaba, Google, IBM, and Microsoft are likely to release commercial uses of quantum computing. IBM has just announced its first commercial quantum computer that can work outside the research lab, yet its power (20 qubits) still does not allow supremacy over classic computing. We can expect further improvements in power, coming closer to quantum supremacy, i.e., the ability to solve problems that classic computers cannot.

9. Blockchain and cryptocurrencies: A year of reckoning

As with most new technologies, the initial take-up is generally surrounded by hype. Blockchain is no exception. When projects and initiatives were first launched, they carried the promise of solving some of the world’s biggest (trust) issues.

Looking back, research into existing initiatives paints a different picture. A team from the US Agency for International Development (USAID) recently concluded that among the 43 blockchain solutions implemented in the international development sector which the team studied, the success rate stood at 0%.

This is not to say that there is no potential in blockchain. The decentralised nature, its potential for overcoming trust issues, and its more secure nature are compelling reasons. However, we may have been looking at blockchain the wrong way: rather than developing it as a solution to our problems, we have been trying to identify cases where it can be used. Whenever blockchain was a solution for a problem it succeeded, such as in supporting supply chains and manufacturing.

Regardless of how we approach problem-solving, 2019 will be a year of reckoning for blockchain. Experiments will be reviewed and assessed, and those with an interest in the technology will need to decide whether to sustain it.


A blow for bitcoin

Bitcoin, the most popular cryptocurrency, is also in hot water. The currency closed 2017 at around €17 500 (USD$20 000), and 2018 at just under €3500 (USD$4000). Other cryptocurrencies also suffered losses. Experts say that many cryptocurrencies are resilient, and their volatility is a natural characteristic.

Policymakers are less optimistic. The overall regulatory trend is to properly recognise different types of cryptocurrency and to update financial rules to classify new digital financial assets.

Financial regulators around the world have advocated for strong anti-money-laundering rules to be imposed on every known and registered online exchange. Major online cryptocurrency exchanges now implement Know-Your-Customer (KYC) procedures to identify customers. 

In many countries, digital tokens issued through Initial Coin Offerings last year are now considered a new form of digital assets covered by security laws. Legislators have started to make informed decisions on customer protection, putting  a halt to any uncertain or unclear investments schemes.

10. Digital identities will catch on

Questions of identity of individuals, groups, and nations are behind many political controversies worldwide. Identity issues spill over from real to digital issues with many possibilities, some risks, and a few dilemmas. In 2019, many countries will search for new ways to manage digital identities in a close interlink with traditional citizen identities (ID documents, citizen registries, etc.). On the menu for digital identities are the following main approaches.

 
Tech companies

Big tech companies, such as Facebook and Google, have become providers of digital identities. The credentials provided by these companies are used for access to digital services provided worldwide. This role of ‘identity broker’ gives these companies a lot of power over data and, in turn, a deep understanding of economic, political, and social activities of individuals. Digital identity and associated data is used as the basis of the business models of the leading tech companies. This approach is attracting more and more criticism worldwide.

 
Data protection

One of the responses to the dominant role of tech-companies as digital identity brokers is the EU’s GDPR, which provides EU citizens not only with the protection of their data, but also with new ways of managing their digital identity by providing them more choice and a stronger say in how their data is used and shared.

 
Inclusive finance

India’s Aadhaar and India Stacks approach provides a digital identity to 1.3 billion citizens as part of public services with necessary mechanisms for protection of identity, privacy, and security of citizens. Based on this publicly owned infrastructure, businesses and other actors can provide their services such as e-commerce or inclusive finance. Many developing countries are considering the use of Aadhar to develop their digital identity systems.

Inclusive finance has been one of the ways used for recognising individuals legally and economically. Even people without a street address could obtain an identity on platforms such as MPesa. Digital identities have managed to integrate marginalised communities within societal and economic dynamism.

‘Tech’ emerges as leading prefix

Language will also matter. Diplo’s analysis of digital-related texts in The Economist’s 2018 issues, and IGF transcripts confirm tech as the leading prefix. In The Economist, tech was by far the most frequently used prefix. It featured in terms such as tech entrepreneur, tech giant, and tech boom. Prefixes digital and net came in second and third place whereas cyber and virtual were the least used.

 
Main events in 2019

The events below ‒ an extract from a very busy calendar of events ‒ are likely to mark digital policy in 2019. While the list highlights events, in most cases they form part of processes which will run throughout the year. A full database of upcoming events and processes, and past events, is available on the GIP Digital Watch observatory.

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