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The Privacy Shield Framework logo is displayed on a smartphone screen.

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Businesses can continue transferring data from the European Union to the U.S. as normal after the two superpowers this week agreed a landmark data-sharing pact.

The framework, which replaces a previous agreement that was invalidated in 2020, is a major development with implications for U.S. tech giants, which rely on the pact to transfer data on their European users back to America.

Without it in place, these companies faced the risk of costly initiatives to process and store user data locally — or withdraw their business from the bloc altogether. So the agreement of the new rules will provide some relief to Meta and other U.S. companies which share gargantuan amounts of user data around the world.

However, the rules already face the threat of legal challenges from privacy activists, who are unhappy with the level of protection the measures offer European citizens. They say it isn’t that different from an earlier framework called Privacy Shield.

CNBC runs through all you need to know about the new EU-U.S. privacy framework, why it matters, and its chances of success.

What’s the new EU-U.S. Data Privacy Framework?

The new data-sharing pact, called the EU-U.S. Data Privacy Framework, aims to ensure that data can flow safely between the EU and U.S., without having to put in place additional data protection safeguards.

In a statement Monday, EU executive body the European Commission said it concluded that U.S. data protection laws offer an “adequate level of protection” for European citizens, and introduced new safeguards limiting access to EU data by U.S. intelligence services to only what is “necessary and proportionate.”

A new Data Protection Review Court will be established for Europeans to issue privacy complaints. It will have powers to order firms to delete users’ data if it finds the information collected was in breach of the new safeguards.

Why was a new data transfer agreement needed?

The Data Privacy Framework replaces a prior agreement, called Privacy Shield, which allowed companies to share data on Europeans to the U.S. for storage and processing locally in their domestic data centers.

This was struck down in July 2020, when the European Court of Justice, the EU’s top court, sided with Austrian privacy campaigner Max Schrems, who alleged U.S. law did not offer sufficient protection against surveillance by public authorities.

Schrems said that revelations from NSA whistleblower Edward Snowden about U.S. surveillance meant that American data protection standards couldn’t be trusted.

He raised a complaint against the social network Facebook which, like many other firms, was transferring his and other user data to the States, as well as the Irish Data Protection Commission, which is Facebook’s main regulatory authority when it comes to data privacy in Europe.

It reached the European Court of Justice, which in 2015 ruled that the then Safe Harbour Agreement, a previous mechanism for allowing European users’ data to be moved to the U.S., was not valid and did not adequately protect European citizens.

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It was replaced with the Privacy Shield, however, this was subsequently scrapped too.

In the meantime, companies have relied on separate mechanisms known as Standard Contractual Clauses to ensure they can still move data across the Atlantic.

These tools, too, are under threat.

The Irish DPC in May ruled that Meta’s use of SCCs for transfers of personal data to the U.S. is in breach of the EU’s General Data Protection Regulation. The U.S. tech giant was fined a record $1.3 billion.

Why does it matter?

Multinational companies operate in various jurisdictions, and they need to move data on their customers across borders in a way that’s both secure and complies with data protection regulations.

U.S. tech giants share data on their European users back home all the time. It’s part and parcel of the internet being an open, interconnected platform.

But the way data is handled by these tech companies has come under heavy scrutiny by regulators and privacy campaigners.

Meta, Google, Amazon and others collect huge amounts of data on their users, which they use to inform their content recommendation algorithms and personalize ads.

There have also been countless examples of scandals surrounding the misuse of people’s data by tech firms — not least Meta’s improper sharing of data with Cambridge Analytica, the controversial political consulting firm.

Europe has tough regulations when it comes to processing internet users’ data.

In 2018, the General Data Protection Regulation, or GDPR, came into force introducing tough requirements for organizations to ensure they handle user data safely and securely. This is a law that applies across all the countries within the EU.

The U.S., on the other hand, does not have a singular federal data protection law in place that covers the privacy of all types of data.

Instead, individual U.S. states have come up with their own respective regulations for data privacy, with California leading the charge.

“There has been intense regulatory and political scrutiny on EU-U.S. data transfers, so there are notable differences in the U.S. law protections implemented to support the new framework,” Holger Lutz, partner at law firm Clifford Chance, told CNBC via email.

“Changes to U.S. law have been made in parallel to enhance protections for EU personal data and rights for EU citizens in connection with that data. Those protections are not limited to the new framework – they also protect EU-U.S. personal data transfers outside the framework, and can be taken into account when making such transfers based on other legal instruments such as the EU standard contractual clauses.”

Will it succeed?

The approval of a new data privacy framework means that businesses will now have certainty over how they can process data across borders going forward.

Had there not been an agreement, some companies may have been forced to close their operations in Europe. Indeed, Meta warned this was a risk in February 2022.

Still, obstacles lie ahead.

Schrems, the Austrian privacy activist who helped bring down Privacy Shield, has already said he plans to launch a legal challenge to rip up the new data-sharing pact.

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In a statement, Schrems said his law firm Noyb has “various options for a challenge already in the drawer.”

“We currently expect this to be back at the Court of Justice by the beginning of next year,” Schrems said.

“The Court of Justice could then even suspend the new deal while it is reviewing the substance of it. For the sake of legal certainty and the rule of law we will then get an answer if the Commission’s tiny improvements were enough or not.”

Privacy activists say the measures are not sufficient as U.S. privacy laws do not extend protections to non-U.S. citizens, meaning people in the EU don’t have the same level of protection.

“Whether the framework is successful will be a matter of whether the European courts consider the protections for personal data in the US do enough to deliver essential equivalence to the EU protections,” Lutz of Clifford Chance told CNBC.

“Businesses will be carefully considering these potential challenges in their scenario planning.”

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How Elon Musk’s plan to slash government agencies and regulation may benefit his empire

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How Elon Musk’s plan to slash government agencies and regulation may benefit his empire

Elon Musk’s business empire is sprawling. It includes electric vehicle maker Tesla, social media company X, artificial intelligence startup xAI, computer interface company Neuralink, tunneling venture Boring Company and aerospace firm SpaceX. 

Some of his ventures already benefit tremendously from federal contracts. SpaceX has received more than $19 billion from contracts with the federal government, according to research from FedScout. Under a second Trump presidency, more lucrative contracts could come its way. SpaceX is on track to take in billions of dollars annually from prime contracts with the federal government for years to come, according to FedScout CEO Geoff Orazem.

Musk, who has frequently blamed the government for stifling innovation, could also push for less regulation of his businesses. Earlier this month, Musk and former Republican presidential candidate Vivek Ramaswamy were tapped by Trump to lead a government efficiency group called the Department of Government Efficiency, or DOGE.

In a recent commentary piece in the Wall Street Journal, Musk and Ramaswamy wrote that DOGE will “pursue three major kinds of reform: regulatory rescissions, administrative reductions and cost savings.” They went on to say that many existing federal regulations were never passed by Congress and should therefore be nullified, which President-elect Trump could accomplish through executive action. Musk and Ramaswamy also championed the large-scale auditing of agencies, calling out the Pentagon for failing its seventh consecutive audit. 

“The number one way Elon Musk and his companies would benefit from a Trump administration is through deregulation and defanging, you know, giving fewer resources to federal agencies tasked with oversight of him and his businesses,” says CNBC technology reporter Lora Kolodny.

To learn how else Elon Musk and his companies may benefit from having the ear of the president-elect watch the video.

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Why X’s new terms of service are driving some users to leave Elon Musk’s platform

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Why X's new terms of service are driving some users to leave Elon Musk's platform

Elon Musk attends the America First Policy Institute gala at Mar-A-Lago in Palm Beach, Florida, Nov. 14, 2024.

Carlos Barria | Reuters

X’s new terms of service, which took effect Nov. 15, are driving some users off Elon Musk’s microblogging platform. 

The new terms include expansive permissions requiring users to allow the company to use their data to train X’s artificial intelligence models while also making users liable for as much as $15,000 in damages if they use the platform too much. 

The terms are prompting some longtime users of the service, both celebrities and everyday people, to post that they are taking their content to other platforms. 

“With the recent and upcoming changes to the terms of service — and the return of volatile figures — I find myself at a crossroads, facing a direction I can no longer fully support,” actress Gabrielle Union posted on X the same day the new terms took effect, while announcing she would be leaving the platform.

“I’m going to start winding down my Twitter account,” a user with the handle @mplsFietser said in a post. “The changes to the terms of service are the final nail in the coffin for me.”

It’s unclear just how many users have left X due specifically to the company’s new terms of service, but since the start of November, many social media users have flocked to Bluesky, a microblogging startup whose origins stem from Twitter, the former name for X. Some users with new Bluesky accounts have posted that they moved to the service due to Musk and his support for President-elect Donald Trump.

Bluesky’s U.S. mobile app downloads have skyrocketed 651% since the start of November, according to estimates from Sensor Tower. In the same period, X and Meta’s Threads are up 20% and 42%, respectively. 

X and Threads have much larger monthly user bases. Although Musk said in May that X has 600 million monthly users, market intelligence firm Sensor Tower estimates X had 318 million monthly users as of October. That same month, Meta said Threads had nearly 275 million monthly users. Bluesky told CNBC on Thursday it had reached 21 million total users this week.

Here are some of the noteworthy changes in X’s new service terms and how they compare with those of rivals Bluesky and Threads.

Artificial intelligence training

X has come under heightened scrutiny because of its new terms, which say that any content on the service can be used royalty-free to train the company’s artificial intelligence large language models, including its Grok chatbot.

“You agree that this license includes the right for us to (i) provide, promote, and improve the Services, including, for example, for use with and training of our machine learning and artificial intelligence models, whether generative or another type,” X’s terms say.

Additionally, any “user interactions, inputs and results” shared with Grok can be used for what it calls “training and fine-tuning purposes,” according to the Grok section of the X app and website. This specific function, though, can be turned off manually. 

X’s terms do not specify whether users’ private messages can be used to train its AI models, and the company did not respond to a request for comment.

“You should only provide Content that you are comfortable sharing with others,” read a portion of X’s terms of service agreement.

Though X’s new terms may be expansive, Meta’s policies aren’t that different. 

The maker of Threads uses “information shared on Meta’s Products and services” to get its training data, according to the company’s Privacy Center. This includes “posts or photos and their captions.” There is also no direct way for users outside of the European Union to opt out of Meta’s AI training. Meta keeps training data “for as long as we need it on a case-by-case basis to ensure an AI model is operating appropriately, safely and efficiently,” according to its Privacy Center. 

Under Meta’s policy, private messages with friends or family aren’t used to train AI unless one of the users in a chat chooses to share it with the models, which can include Meta AI and AI Studio.

Bluesky, which has seen a user growth surge since Election Day, doesn’t do any generative AI training. 

“We do not use any of your content to train generative AI, and have no intention of doing so,” Bluesky said in a post on its platform Friday, confirming the same to CNBC as well.

Liquidated damages

Bluesky CEO: Our platform is 'radically different' from anything else in social media

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The Pentagon’s battle inside the U.S. for control of a new Cyber Force

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The Pentagon's battle inside the U.S. for control of a new Cyber Force

A recent Chinese cyber-espionage attack inside the nation’s major telecom networks that may have reached as high as the communications of President-elect Donald Trump and Vice President-elect J.D. Vance was designated this week by one U.S. senator as “far and away the most serious telecom hack in our history.”

The U.S. has yet to figure out the full scope of what China accomplished, and whether or not its spies are still inside U.S. communication networks.

“The barn door is still wide open, or mostly open,” Senator Mark Warner of Virginia and chairman of the Senate Intelligence Committee told the New York Times on Thursday.

The revelations highlight the rising cyberthreats tied to geopolitics and nation-state actor rivals of the U.S., but inside the federal government, there’s disagreement on how to fight back, with some advocates calling for the creation of an independent federal U.S. Cyber Force. In September, the Department of Defense formally appealed to Congress, urging lawmakers to reject that approach.

Among one of the most prominent voices advocating for the new branch is the Foundation for Defense of Democracies, a national security think tank, but the issue extends far beyond any single group. In June, defense committees in both the House and Senate approved measures calling for independent evaluations of the feasibility to create a separate cyber branch, as part of the annual defense policy deliberations.

Drawing on insights from more than 75 active-duty and retired military officers experienced in cyber operations, the FDD’s 40-page report highlights what it says are chronic structural issues within the U.S. Cyber Command (CYBERCOM), including fragmented recruitment and training practices across the Army, Navy, Air Force, and Marines.

“America’s cyber force generation system is clearly broken,” the FDD wrote, citing comments made in 2023 by then-leader of U.S. Cyber Command, Army General Paul Nakasone, who took over the role in 2018 and described current U.S. military cyber organization as unsustainable: “All options are on the table, except the status quo,” Nakasone had said.

Concern with Congress and a changing White House

The FDD analysis points to “deep concerns” that have existed within Congress for a decade — among members of both parties — about the military being able to staff up to successfully defend cyberspace. Talent shortages, inconsistent training, and misaligned missions, are undermining CYBERCOM’s capacity to respond effectively to complex cyber threats, it says. Creating a dedicated branch, proponents argue, would better position the U.S. in cyberspace. The Pentagon, however, warns that such a move could disrupt coordination, increase fragmentation, and ultimately weaken U.S. cyber readiness.

As the Pentagon doubles down on its resistance to establishment of a separate U.S. Cyber Force, the incoming Trump administration could play a significant role in shaping whether America leans toward a centralized cyber strategy or reinforces the current integrated framework that emphasizes cross-branch coordination.

Known for his assertive national security measures, Trump’s 2018 National Cyber Strategy emphasized embedding cyber capabilities across all elements of national power and focusing on cross-departmental coordination and public-private partnerships rather than creating a standalone cyber entity. At that time, the Trump’s administration emphasized centralizing civilian cybersecurity efforts under the Department of Homeland Security while tasking the Department of Defense with addressing more complex, defense-specific cyber threats. Trump’s pick for Secretary of Homeland Security, South Dakota Governor Kristi Noem, has talked up her, and her state’s, focus on cybersecurity.

Former Trump officials believe that a second Trump administration will take an aggressive stance on national security, fill gaps at the Energy Department, and reduce regulatory burdens on the private sector. They anticipate a stronger focus on offensive cyber operations, tailored threat vulnerability protection, and greater coordination between state and local governments. Changes will be coming at the top of the Cybersecurity and Infrastructure Security Agency, which was created during Trump’s first term and where current director Jen Easterly has announced she will leave once Trump is inaugurated.

Cyber Command 2.0 and the U.S. military

John Cohen, executive director of the Program for Countering Hybrid Threats at the Center for Internet Security, is among those who share the Pentagon’s concerns. “We can no longer afford to operate in stovepipes,” Cohen said, warning that a separate cyber branch could worsen existing silos and further isolate cyber operations from other critical military efforts.

Cohen emphasized that adversaries like China and Russia employ cyber tactics as part of broader, integrated strategies that include economic, physical, and psychological components. To counter such threats, he argued, the U.S. needs a cohesive approach across its military branches. “Confronting that requires our military to adapt to the changing battlespace in a consistent way,” he said.

In 2018, CYBERCOM certified its Cyber Mission Force teams as fully staffed, but concerns have been expressed by the FDD and others that personnel were shifted between teams to meet staffing goals — a move they say masked deeper structural problems. Nakasone has called for a CYBERCOM 2.0, saying in comments early this year “How do we think about training differently? How do we think about personnel differently?” and adding that a major issue has been the approach to military staffing within the command.

Austin Berglas, a former head of the FBI’s cyber program in New York who worked on consolidation efforts inside the Bureau, believes a separate cyber force could enhance U.S. capabilities by centralizing resources and priorities. “When I first took over the [FBI] cyber program … the assets were scattered,” said Berglas, who is now the global head of professional services at supply chain cyber defense company BlueVoyant. Centralization brought focus and efficiency to the FBI’s cyber efforts, he said, and it’s a model he believes would benefit the military’s cyber efforts as well. “Cyber is a different beast,” Berglas said, emphasizing the need for specialized training, advancement, and resource allocation that isn’t diluted by competing military priorities.

Berglas also pointed to the ongoing “cyber arms race” with adversaries like China, Russia, Iran, and North Korea. He warned that without a dedicated force, the U.S. risks falling behind as these nations expand their offensive cyber capabilities and exploit vulnerabilities across critical infrastructure.

Nakasone said in his comments earlier this year that a lot has changed since 2013 when U.S. Cyber Command began building out its Cyber Mission Force to combat issues like counterterrorism and financial cybercrime coming from Iran. “Completely different world in which we live in today,” he said, citing the threats from China and Russia.

Brandon Wales, a former executive director of the CISA, said there is the need to bolster U.S. cyber capabilities, but he cautions against major structural changes during a period of heightened global threats.

“A reorganization of this scale is obviously going to be disruptive and will take time,” said Wales, who is now vice president of cybersecurity strategy at SentinelOne.

He cited China’s preparations for a potential conflict over Taiwan as a reason the U.S. military needs to maintain readiness. Rather than creating a new branch, Wales supports initiatives like Cyber Command 2.0 and its aim to enhance coordination and capabilities within the existing structure. “Large reorganizations should always be the last resort because of how disruptive they are,” he said.

Wales says it’s important to ensure any structural changes do not undermine integration across military branches and recognize that coordination across existing branches is critical to addressing the complex, multidomain threats posed by U.S. adversaries. “You should not always assume that centralization solves all of your problems,” he said. “We need to enhance our capabilities, both defensively and offensively. This isn’t about one solution; it’s about ensuring we can quickly see, stop, disrupt, and prevent threats from hitting our critical infrastructure and systems,” he added.

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