From the article <URL:http://www.sjmercury.com/business/compute/encrypt1115.htm>:
Under the plan computer makers could equip their machines, including personal computers, with electronic ''locks'' of almost any strength. A single computer model with strong built-in encryption could legally be sold in both domestic and foreign markets.
The key is that the encryption circuitry would be inactive in exported machines, unless both buyer and seller obtained all legally required licenses to turn it on.
Domestic customers, and export buyers with a license, would get a special key card to turn on the encryption, according to HP. Manufacturers would thus be relieved of the burden of making different computers for export than for domestic use.
So it sounds like the idea is to build crypto around card tokens. I think HP has been pushing this for some time. The question is, will this somehow become the only way to get access to crypto? Unlike the earlier IBM/CIA announcement, this time Netscape and Microsoft have apparently been brought on board. That is a lot worse because these companies are where most people are going to get their crypto in the future. If they have open standards, we can make good crypto available. But if this announcement signals some kind of closing of the system so that only hardware tokens will be used, it could become a lot harder to make strong crypto available. There are also the economic questions about how much these key cards are going to cost, and whether they are going to be routinely supplied with computers or an extra cost item that consumers have to go out and buy. If the latter, a lot of people won't bother, and we'll just have that much larger a barrier to widespread use of crypto. It is certainly very disturbing to see these new moves. Obviously a great deal of behind the scenes negotiations and pressure has been occuring. You have to wonder why Netscape, for example, would forego the opportunity to differentiate themselves from rival Microsoft by positioning their product as the one which refuses to bow to government pressure on crypto. It's also not clear what the hardware manufacturers get out of this. Their sales overseas have never been blocked. There has been no demand for custom crypto hardware. I don't see how they have been harmed by an inability to ship computers with built-in encryption hardware. Granted there are some possible applications for such systems but I don't see the market demand which would drive this decision. Hal