Fully Homomorphic Encryption: A Catalyst for Privacy-First Compliance in a Regulated World

The relentless growth in data creation, coupled with the widespread adoption of AI and cloud computing, has elevated privacy and security to top priorities for organizations worldwide. By 2030, global data volumes are expected to reach one Yottabyte (Gilder, 2021). With this data explosion comes stricter regulatory scrutiny, as governments around the world implement laws to protect personal information and hold companies accountable for its misuse.

In this environment, Fully Homomorphic Encryption (FHE) offers a transformative solution. By enabling encrypted data to be processed without ever decrypting it, FHE ensures privacy across every stage of computation. Niobium Microsystems is at the forefront of this innovation, providing hardware acceleration for FHE to make it fast enough for real-world applications.

This blog offers a broad overview of evolving privacy legislation, including how FHE can help organizations meet new requirements and face rising quantum threats without slowing the pace of innovation.

The UK Data (Use and Access) Bill (DUA): A Privacy Evolution

The United Kingdom is advancing its data protection framework through the introduction of the Data (Use and Access) Bill (DUA), which was presented to Parliament on October 23, 2024. This legislation aims to modernize data usage policies, fostering innovation while ensuring robust privacy protections (Ross 2024).

Key Aspects of the DPDI

1. Easier Data Use for Innovation:
   The DUA seeks to unlock the potential of data across various sectors by promoting secure and efficient data sharing practices. This initiative is designed to stimulate economic growth and enhance public services.
2. Higher Standards of Accountability:
   Organizations will be required to adhere to updated data protection standards, including maintaining comprehensive documentation and conducting impact assessments. These measures align with global trends toward heightened accountability in data processing activities.
3. Stronger Enforcement:
   Fines for non-compliance are expected to increase, making robust data protection a non-negotiable priority.

Challenges and Opportunities

While the DPDI simplifies certain processes, companies must still adopt advanced tools to meet these stricter requirements. For example, organizations must secure data throughout its lifecycle, particularly in shared environments like the cloud or during AI model training.

FHE as a Solution

1. Secure Cloud Workflows:
   Cloud adoption in the UK is rising steadily, with industries like healthcare and finance particularly dependent on it. FHE allows sensitive data to remain encrypted even during processing, addressing the risks associated with cloud-based operations.
2. Regulatory Compliance with Minimal Overhead:
   Under the DUA, businesses must implement accountability measures, including detailed data logs and impact assessments. By encrypting data end-to-end, FHE simplifies compliance by eliminating the risk of unauthorized access.
3. Ethical AI Development:
   The DUA emphasizes transparency and accountability in AI. FHE enables organizations to train AI models on encrypted data, preserving user privacy without compromising performance.

GDPR and the Evolving EU Data Privacy Landscape

The General Data Protection Regulation (GDPR) remains the benchmark for global privacy laws. However, as highlighted by Politico Europe, GDPR is evolving to address new challenges, including the rapid proliferation of AI, stricter cross-border data requirements, and enhanced consumer rights.

Key GDPR Developments

1. Expanded Consumer Rights:
   Updates to GDPR have given individuals greater control over their data, requiring organizations to provide clearer data use disclosures and easier data portability options (Irwin, 2020)
2. Tougher Cross-Border Data Controls:
   The Schrems II decision has already restricted data transfers outside the EU to countries lacking equivalent privacy protections, a trend expected to intensify over the coming years (IAPP, 2020).
3. Higher Penalties for Non-Compliance:
   GDPR enforcement remains a critical focus area for EU regulators, and the average size of each fine has risen steadily as regulators have pursued bigger targets more aggressively. In 2024, the average GDPR fine was over €5 million, compared to €4 million in 2023 and €1.5 million in 2022. The cost of data mishandling is rising precipitously (GDPR Enforcement Tracker, 2025).

Challenges for EU Companies

Companies face a growing need to balance innovation with compliance. Cloud computing, for example, offers cost savings and scalability, but poses significant risks when sensitive customer data is transferred or processed. Similarly, AI development requires large datasets, often sourced from multiple jurisdictions, further complicating compliance.

FHE as a Solution

1. Cross-Border Data Processing:
   FHE enables organizations to securely process encrypted data across borders, potentially avoiding the legal complexities of data transfer while complying with GDPR’s stringent requirements. For example, multinational healthcare providers could analyze patient records without exposing private information to third-party jurisdictions.
2. AI Model Transparency and Security:
   GDPR’s focus on algorithmic accountability requires organizations to prove their AI systems respect data privacy. With FHE, sensitive training data is never decrypted, ensuring compliance without compromising security.

1. Cloud Compliance:
   Over 75% of EU businesses use cloud solutions for operational efficiency. FHE provides the security backbone needed to protect sensitive data, ensuring it remains encrypted throughout cloud-based workflows.

Standards development efforts are well underway to establish internationally-accepted definitions, frameworks, security models, and more for FHE. This work could well be the future bedrock of regulatory acceptance for cross-jurisdictional computation on always-encrypted data.

The Fragmented U.S. Privacy Law Landscape

The United States lacks a comprehensive federal privacy law akin to the GDPR or DUA, leaving businesses to navigate a complex patchwork of state-specific regulations. With twelve states enacting privacy laws by the end of 2023 and seven more joining in 2024, companies face mounting compliance challenges (Wall Street Journal, 2024).

Key U.S. Privacy Trends

• State-Led Privacy Laws:
  Laws like the California Consumer Privacy Act (CCPA) and its successor, the CPRA, set the tone for comprehensive consumer rights in the absence of federal legislation.
• Sector-Specific Frameworks:
  Federal laws such as HIPAA and GLBA focus on healthcare and financial sectors, but these limited scopes leave significant gaps.
• Increasing Enforcement Actions:
  States have ramped up enforcement, with higher fines and stringent data protection mandates emerging as trends.

Challenges and Opportunities

For businesses, the lack of harmonization between state laws complicates compliance, especially when operating across jurisdictions. As the American Privacy Rights Act (APRA) failed to gain traction, companies must ensure they remain agile to address evolving state-specific requirements.

FHE as a Solution

• Uniform Data Security Across Jurisdictions:
  By processing encrypted data without decryption, FHE provides a unified security layer that helps organizations meet the highest standards across all state laws.
• Compliance Without Risk:
  Whether handling healthcare data under HIPAA or financial information under GLBA, FHE ensures that sensitive information remains private throughout its lifecycle, even in multi-jurisdictional scenarios.
• Future-Proofing Against Quantum Threats:
  As quantum computing risks loom large, FHE offers a scalable path to secure data against emerging vulnerabilities.

In the absence of federal legislation, companies leveraging advanced encryption technologies like FHE can achieve compliance, mitigate risks, and build consumer trust across an increasingly fragmented regulatory environment

The Path Ahead

Regulations aside, the need for privacy-enhanced computing in the AI era is urgent.  Gartner research suggests that 40% of companies using AI have experienced  an AI privacy breach. Malicious hackers were responsible for only a quarter of those breaches; the rest came from internal or third-party data mishandling. Whether organizations process personal data through an AI-based module integrated into a vendor offering, or a discrete platform managed by an in-house data science team, the risks to privacy and potential misuse of personal data are clear.

As long as regulations and internal policies are dependent on perimeter-based security, we will never solve this problem. Only FHE can guarantee data remains private during computation. Regulators are acting to define and enforce privacy rights: it’s time for a new technology paradigm to meet this moment. It’s time for FHE.

References

1. IDC (2018). The Digitization of the World – From Edge to Core. Available at: https://www.seagate.com/files/www-content/our-story/trends/files/idc-seagate-dataage-whitepaper.pdf.
2. Gartner (2022).  Gartner Identifies Top Five Trends in Privacy Through 2024. Available at: https://www.gartner.com/en/newsroom/press-releases/2022-05-31-gartner-identifies-top-five-trends-in-privacy-through-2024.
3. Wall Street Journal (2024). Patchwork of State Privacy Laws Remains After Latest Failed Bid for Federal Law. Available at: https://www.wsj.com/articles/patchwork-of-state-privacy-laws-remains-after-latest-failed-bid-for-federal-law-2a1a020d.
4. Gilder, G. et al (2021). Huawei Intelligent World 2030. Available at: https://www-file.huawei.com/-/media/corp2020/pdf/giv/intelligent_world_2030_en.pdf.
5. GDPR Enforcement Tracker (2025). Available at: https://www.enforcementtracker.com/.
6. Irwin, L. (2020). The GDPR: Understanding the right to data portability. Available at: https://www.itgovernance.eu/blog/en/the-gdpr-understanding-the-right-to-data-portability.
7. Fennessy, C. (2020). The ‘Schrems II’ decision: EU-US data transfers in question. Available at: https://iapp.org/news/a/the-schrems-ii-decision-eu-us-data-transfers-in-question/.
8. Xiaohan F. et al (2024). Imprompter: Tricking LLM Agents into Improper Tool Use. Available at: https://imprompter.ai/paper.pdf.
9. Ross, N. (2024). The Data (Use and Access) Bill: What’s changed and what remains from the DPDI Bill. Available at: https://www.techuk.org/resource/the-data-use-and-access-bill-what-s-changed-and-what-remains-from-the-dpdi-bill.html.
10. ISO (2024). ISO/IEC CD 28033-1 Information security — Fully homomorphic encryption. Available at: https://www.iso.org/standard/87638.html.