This chapter focuses on the issues that are shaping the European Commission and British governments' policies concerning the Internet. Information Communication Technologies have been seen as the centrepiece for future production, services and investment. It has been argued that new forms of electronic commerce may promote competitiveness, efficiency and growth. The chapter considers how the debate concerning state intervention/retraction has impacted upon the cryptographic policy initiative. It outlines the principal issues which are facing governments as they attempt to reconcile their desire to establish a free electronic economy, while stemming the flow of potentially illicit, illegal or dangerous material. In particular, cryptography raises significant concerns about the state's access to private information. Moreover, this form of intervention stands at the centre of the debate concerning the role of the state as a key actor in creating a framework for investment and innovation within the knowledge-driven economies.