March 31, 2023

The Tiktok hearing backfires

As expected, Congress tried to turn its cross-examination of Tiktok CEO Shou Chew into a public stoning. Committee members (helped along by Meta lobbying) came in with their minds made up, refused to listen to anything he said, and repeatedly interrupted him. The app was unfairly blamed for everything bad about social media in general and for the crimes of Communist China, as if Chew, a Singaporean, was Xi Jinping.

But if the treatment was intended to solidify public support for a ban, it backfired. The browbeating generated sympathy for the CEO among many members of the public. The technically ignorant questions asked by aging representatives made the Congress look out of touch. Liberals, civil libertarians and progressives finally began to push back against a ban. The Executive Director of the Knight Foundation penned a New York Times op-ed invoking the First Amendment.

What happened next was even more interesting. People on the left, the right and the middle began to look closely at the legislative vehicle for a ban: the RESTRICT Act. When IGP reported on the Act two weeks ago, few seemed to notice. Now everyone on is talking about it, and people are writing their lawmakers about it. Most of the coverage is negative. People are angrily discovering its jaw-dropping centralization of arbitrary power over technology, and revealing aspects of the law that are even worse than we reported (the Act may make it illegal to access a “banned” technology or website by VPN under penalty of 20 years in prison and/or up to $1 million fine). It’s a comprehensive attempt to control all information technology and is being called PATRIOT Act 2.0.

Another unintended side-effect of the hearing was the awakening of the Tiktok community.  Before this, there was little discussion of a ban on TikTok itself. Post-hearing, however, one’s For You feed is dominated by videos ridiculing the stupidest questions from committee members, arguments against a ban, critiques of the RESTRICT Act, and complaints about how Facebook and other big U.S. tech firms are targeting their foreign-owned competitor. The ban threat has now brought 100 million users into a more cohesive community. It will be hard for the ban advocates to dismiss this uproar as a product of Communist China. People are also beginning to notice, with deep suspicion, that Meta and Snapchat stocks soared after the hearing, and that many Congresspeople hold stock in those companies.

We Keep Droning on About Fake Security Threats

It’s an old story but important to recall in the current context: Chinese drone manufacturer DJI is now on the Commerce Department’s Entity List, and the Defense Department’s Civil-Military Fusion Banned List. But before that, DJI drones were temporarily grounded by the Department of the Interior (DoI) due to doubts about data security. Security risks were independently evaluated by technical experts. The expert reports cleared the drones for DoI use. Unfortunately, the report seems to have been buried.

Stablecoins at Point of Sale

In the digital money race, it looks like stablecoin is leading in the areas of trust and usability. Mastercard recently announced a new partnership with Stables, an Australian stablecoin platform, to provide transaction facilities at all locations in the APAC region where mastercard is accepted. Earlier in February, mastercard also partnered with Immersive, a New-Zealand based web3 company. Both these collaborations will yield a stablecoin-only digital wallet with a payment card. Stablecoin will be converted to fiat for settlement at the point of sale on the mastercard network. This might lead to increased adoption of stablecoins in two ways – 1) It integrates the conversion of digital currency, albeit only USD Coin (USDC) for now, to fiat without any hassle for the user and the merchant at the retail level. This would make DeFi solutions easily usable and accessible since mastercard is accepted at most physical and digital merchant locations. 2) Mastercard provides trust backing owing to its reputation. Moreover, it will also handle the KYC/AML requirements and fraud detection using its existing framework of Mastercard Identity Services and CipherTrace Solution adding a layer of security to the otherwise chaotic crypto space.

These developments are particularly interesting because of the exclusive linkage to USDC, a stablecoin pegged to the US Dollar. Australian banks are also experimenting in the stablecoin space. Instead of going the CBDC route, the National Australia Bank recently issued the Australian stablecoin, AUDN. This will enable users to transact on blockchain technology using the Australian Dollar on Ethereum. For now, they have effectively executed cross-border transaction experiments using AUDN, cutting transaction time and cost. Australia is not singular in this effort though, Universal Digital Payments Network and Russia’s attempt at Gold based stablecoin are attempts at serious viable alternatives to existing transaction and settlement systems.