The IT industry won a major victory this week when the government finally confirmed that it has abandoned plans to implement a controversial and costly key escrow system to tap into encrypted communications.
The move is a clear signal that the government's electronic commerce bill - due next month - will adopt a light touch and embrace self regulation rather than risk damaging the emerging ecommerce industry.
The decision is the result of a special report from an encryption task force set up by Prime Minister Tony Blair in March and published this week.
Key escrow is a mechanism for interception of encrypted communications - helpful in combating serious crime - requiring encryption users to deposit a copy of their encryption keys with a third party.
The third party releases the keys to police on production of a warrant. Critics say the system would be sidestepped by criminals, compromise privacy and create a weak link in security systems. The needs of law enforcement - still considered vital - will now be met by legislation requiring encryption users to decrypt data on production of a warrant.
Escrow was first proposed in the UK by the then Conservative government in 1997, when it was severely criticised by the Labour opposition. Once in power, Labour changed course and adopted the Tory policy, with only minor changes.
The decision was welcomed by opponents of key escrow, including Microsoft, high street banks, The Confederation of British Industry, the Post Office and BT.
David Svendsen, chairman of Microsoft UK said: "This sounds like very good news."
Steve Thomas, head of security with banking trade body APACS, which represents the heaviest users of encryption, described the proposals, "as an outbreak of common sense."
Stephen Byers, secretary of state for trade and industry, will be responsible for implementation of the report's verdict.
The report calls for two bodies to be created, to foster dialogue between law enforcement and the industry with the intention of combating cybercrime.
One will be a small senior group and the second a virtual centre of expertise, comprising industry experts on key technologies.
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