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THE ROLE OF DATA PROTECTION IN DISTRIBUTED TECHNOLOGY

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THE ROLE OF DATA PROTECTION IN DISTRIBUTED TECHNOLOGY 1

The General Data Protection Regulation (GDPR) comes into force in May. It has taken years of effort by the European Parliament, the Council of the European Union and the European Commission to strengthen and unify data protection for everyone who lives within the EU, and to address the export of personal data outside it, creating a compliance challenge for every company.

GDPR creates one set of EU rules for protection applicable to personal data. It also applies to businesses dealing with personal data in the EU, even if they are based elsewhere. By updating the law on individual privacy and autonomy, it recognises the enormous changes in technology and data usage that have taken place.Specifically, GDPR will introduce new accountability obligations, stronger rights and restrictions on international data flows.

Stepping into line with the new regulations has kept in-house lawyers and their law firms busy. GDPR’s impact on every business is most apparent in the new consent rules: many companies have had to change their current data protection practices and policies to ensure compliance. Ambitious and complex, the new framework is also harsh. Failure to comply could result in severe sanctions: a maximum fine of €10m or 2% of annual worldwide turnover, whichever is greater.

Beyond non-compliance penalties, there is an upside: GDPR enables organisations to realise the opportunities of the digital age by taking advantage of everything presented by new technologies, data analytics and personal information. The great technological strides that gave life to GDPR really matter for economies at a micro and macro level. This applies especially to data gathered from individual internet footprints, each with distinct interests and characteristics. Collated, sorted and analysed by AI computer systems, the information gathered about each individual and their online habits forms the raw ingredients for the creation of refined profit.

One prominent example is blockchain, most commonly used in cryptocurrencies. Although bitcoin is the best known, there are now nearly 1500 different types. These are increasingly used by starts ups and fintechs to access funds cheaply: $5.6bn was raised in Initial Coin Offerings (ICOs) last year. The boom in digital currency fundraising has been supplemented by free trading on online exchanges, which provide greater liquidity than traditional equity investments.Presently unregulated, this may soon change: initiatives are underway in the EU to have cryptocurrency regulations in place by 2020.

Attracting start-ups is a competitive business. Although some financial institutions refuse to accept cryptocurrency funds, others are much keener. The same applies in different jurisdictions: banned in the payment systems of China and India, they are welcomed in Switzerland, Sweden, the US and Canada.

Located in an ambitious jurisdiction, the Gibraltar Blockchain Exchange (GBX), a subsidiary of the Gibraltar Stock Exchange, was launched in January to provide a blockchain-based, decentralised cryptocurrency exchange: the world’s first token sale platform for fintech firms using blockchain distributed ledger technology(DLT). As Gibraltar became the first jurisdiction to license and regulate fintech firms using blockchain technology, GBX also formally recognised the use of blockchain records as an accepted mechanism for transmitting payments.

So where does data protection fit into blockchain? With the advent of centralised models of data storage, users believe that their information is protected by a trustworthy custodian. Different types of blockchain were initially designed to function in a “trustless” environment, i.e. one where people can transact directly with each other without needing to trust any third party actor in the ecosystem. In place of a middleman or custodian, a mathematical algorithm, executed and validated by a network of computers, functions as a substitute.

Without a third party custodian, individuals who are true owners of their personal data face an increased risk of that data being lost or stolen making data protection a very real concern. Companies which provide the technology still have the same legal duties as other businesses. The solution mandated by GDPR is that data controllers and processors have to abide by the principle of “data protection by design and default.”

GDPR anticipates that centralised digital data storage will be replaced by DLT: the design and default principle limits “digital states” i.e. software platforms, and those who use them. This requires designers and providers of blockchain technology to create system architectures which includes privacy as a fundamental cornerstone at the outset rather than being introduced as an afterthought.

Various techniques are used to protect privacy: pseudonymisation, which decouples data from individual identity, and data minimisation which involves only sharing data points that are absolutely necessary.Most blockchain technologies already have pseudonymity and data minimisation built in. These record only the public keys of the sender and recipient for each transaction and a cryptographic hash of the transaction content.

It is not possible to reconstruct a transaction or the identity of either of the two participants from a cryptographic hash -data protection by design and default- which means that it automatically complies with GDPR. Unless a party to a transaction chooses to link a public key to a known identity, transactions cannot be traced to an individual or organisation. All blockchain transactions may be public, but personal information relating to them remains confidential.

Even if GDPR were not to apply to Gibraltar after Brexit, The GibraltarFinancial Services Commission (GFSC), would still be concerned as the regulator – and be equally robust – about data protection on DLT transactions. The GFSC has a statutory duty to promote good business practice, protect the public from financial loss and enhance Gibraltar’s reputation as a quality financial centre. Data protection in relation to DLT rests on the latter.

Notwithstandingclevertechnology, no system is fool-proof. For example, hackers recently stole more than $500m from the Tokyo-based cryptocurrency exchange Coincheck, raising concern about security and regulatory protection. Further regulation over ICOs and blockchain technology is inevitable to protect individual privacy. Whether consumers are best protected by ensuring that ‘key management’ be simplified by central authorities that deny users being true owners of their personal data is debatable: a topic which regulators will, no doubt, address in due course.

Steven De Lara is a Senior Associate specialising in International Litigation, with a particular focus on private international law and cross border insolvency. Steven is regularly instructed on civil fraud and regulatory matters, currently focusing on proceeds of crime investigations. 

Cecile Gomez is an Associate who spends most of her time advising and acting for clients on chancery disputes (with a focus on family-related proceedings) and regulatory investigations. She is a key player on risk and AML matters.

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Sterling rises above $1.37 for first time since 2018; UK inflation rises

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Sterling rises above $1.37 for first time since 2018; UK inflation rises 2

By Elizabeth Howcroft

LONDON (Reuters) – A combination of heightened risk appetite in global markets and UK-specific optimism lifted the pound on Wednesday, as it strengthened to its highest in nearly three years against the dollar and five-month highs against the euro.

The dollar weakened against major currencies for the third straight session, helped by U.S. Treasury Secretary nominee Janet Yellen’s urging lawmakers to “act big” on spending and worry about debt later.

The pound rose above $1.37, hitting $1.3720 — its highest since May 2018 — at 1045 GMT. By 1136 GMT it had eased some gains and changed hands at $1.3687, up 0.4% on the day and up 0.2% so far this year.

Versus the euro, the pound hit a five-month high of 88.38 pence per euro, before easing to 88.51 at 1137 GMT, up around 0.5% on the day.

The pound’s recent strengthening can be attributed in part to relief among investors that the impact of Brexit has not caused the chaos some feared, as well as a lessening of negative rates expectations, said Neil Jones, head of FX sales at Mizuho.

“Going into early 2021, there was a bearish sentiment building into the pound on the Brexit deal, in terms of maybe it had a limited reach, and then secondly an expectation of negative rates and so to some extent the market has been cutting down on sterling shorts because neither of those things have been quite so apparent as they were,” he said.

Bank of England Governor Andrew Bailey said last week that there were “lots of issues” with cutting interest rates below zero – a comment which caused sterling to jump.

The UK’s progress in rolling out vaccines is also seen as a positive for investors, Jones said.

Currently, the United Kingdom has vaccinated 4.27 million people with a first dose of the vaccine, among the best in the world per head of population.

“Further progress in vaccinations (a pick-up in the daily rate) by the time the BoE MPC meeting takes place on 4th February may prove enough to hold off on any additional monetary easing,” wrote Derek Halpenny, head of research for global markets at MUFG.

Inflation data for December showed that prices in the UK picked up by more than expected in December, to a 0.6% annual rate.0.6

Inflation has been below the Bank of England’s 2% target since mid-2019 and the COVID-19 pandemic pushed it close to zero as the economy tanked.

(Graphic: CFTC: https://fingfx.thomsonreuters.com/gfx/mkt/oakpeyayxpr/CFTC.png)

(Reporting by Elizabeth Howcroft, editing by Larry King)

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Euro sinks amid broader risk rally against dollar

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Euro sinks amid broader risk rally against dollar 3

By Ritvik Carvalho

LONDON (Reuters) – The euro struggled to join a broader risk rally against the dollar on Wednesday as analysts said the risk of extended lockdowns in Europe to combat the spread of COVID-19 and the continent’s lag in a vaccine rollout were weighing on the currency.

Down 0.1% against the dollar at $1.2117 by 1130 GMT, Europe’s shared currency had only the safe-haven Swiss franc and Sweden’s crown for company in resisting a broad rally against the greenback by the G-10 group of currencies.

“We’re getting more headlines that the current lockdowns will be extended further, which could mean that the euro zone would be flirting with a double-dip recession before long,” said Valentin Marinov, head of G10 FX research at Credit Agricole, noting Europe’s lag in rolling out a coronavirus vaccine compared to the United States and Britain.

“So all of that plays into the story that tomorrow’s ECB meeting, while uneventful in terms of policy announcements, could convey a relatively dovish message to the market. On top of that, President Lagarde could once again jawbone the euro, so the euro is kind of lagging behind.”

Marinov also noted price action in the pound, which hit $1.3720 – a 2-1/2-year high – and 88.38 pence – its highest since May 2020 against the euro – as a contributing factor to euro weakness. [GBP/]

There was also focus on a story by Bloomberg News, which reported the European Central Bank was conducting its bond purchases with specific yield spreads in mind, a strategy that would be reminiscent of yield curve control.

Elsewhere, the risk-sensitive Australian dollar gained 0.4% to $0.7727. The New Zealand dollar, also a commodity currency like the Aussie, gained 0.25% to $0.7133.

DOLLAR WEAKNESS

While the world will be watching Joe Biden’s inauguration as U.S. president at noon in Washington (1700 GMT), traders were more focused on his policies than the ceremony.

U.S. Treasury Secretary nominee Janet Yellen urged lawmakers at her confirmation hearing to “act big” on stimulus spending and said she believes in market-determined exchange rates, without expressing a view on the dollar’s direction.

The index that measures the dollar’s strength against a basket of peers was up almost 0.1% at 90.510. The euro forms nearly 60% of the dollar index by weight.

It also fell 0.1% against the Japanese yen to 103.81 yen per dollar.

While the dollar has perked up in recent weeks on the back of a rise in U.S. Treasury yields, investors still expect the currency to weaken.

“We remain bearish U.S. dollar, and expect the downtrend to resume as U.S. real yields top out,” said Ebrahim Rahbari, FX strategist at CitiFX.

“Continued Fed dovishness remains important for our view, in addition to global recovery, so we’ll watch upcoming Fed-speak closely.”

Positioning data shows investors are overwhelmingly short dollars as they figure that budget and current account deficits will weigh on the greenback.

(Graphic: Dollar positioning: https://fingfx.thomsonreuters.com/gfx/mkt/oakveyombvr/Pasted%20image%201611132945366.png)

UBS Global Wealth Management’s chief investment officer Mark Haefele reiterated a bearish view on the dollar, saying that pro-cyclical currencies such as the euro, commodity-producer currencies, and the pound would benefit “from a broadening economic recovery supported by vaccine rollouts”.

The cryptocurrency Bitcoin fell 4%, trading at $34,468.

(Reporting by Ritvik Carvalho; Editing by Angus MacSwan)

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England soccer star Rashford nets younger buyers for Burberry

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England soccer star Rashford nets younger buyers for Burberry 4

By Sarah Young

LONDON (Reuters) – Burberry stuck to its full-year goals on Wednesday after a media campaign fronted by high-profile English soccer star and social justice advocate Marcus Rashford drew a younger clientele to the British luxury brand.

Higher full-price sales would boost annual margins and Asian demand remained strong, Burberry said, while warning that it could suffer more sales disruption from COVID-19 lockdowns.

Manchester United striker Rashford, 23, has won plaudits for his campaign to help ensure that poorer children do not go hungry with schools closed during the pandemic.

A first coronavirus wave last year cut Burberry’s sales by as much as 45% before a bounce back on strong demand in mainland China and South Korea, which continued in the last few months.

Shares in Burberry were up 5% to 1,825 pence at 0905 GMT, with Citi analysts saying that improved sales quality from fewer markdowns would drive full-year consensus upgrades.

Burberry’s 9% sales decline in its third quarter was worse than the 6% fall in the second, and the company said that 15% of stores were currently closed and 36% operating with restrictions as a result of measures to curb COVID-19’s spread.

“We expect trading will remain susceptible to regional disruptions as we close the financial year,” Burberry said, adding that it was confident of rebounding when the pandemic eases given the brand’s resonance with customers.

In the third quarter, comparable store sales in Europe, the Middle East, India and Africa declined 37%, hit by shops shut in lockdowns and a lack of tourists visiting Europe, but in the same period, it posted sales growth of 11% in Asia Pacific.

Burberry said that Britain’s new relationship with the European Union would cause headwinds, warning of a modest increase in costs to comply with new rules and also the impact of an end to a scheme for VAT refunds for non-EU tourists.

This would make Britain a less attractive destination for luxury shopping when tourism returns after the pandemic, Burberry said, adding that it would try to mitigate the effect.

(Reporting by Sarah Young; Editing by Kate Holton, James Davey and Alexander Smith)

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