November 2022 Global Tech Policy Bulletin: From Crypto Drama to Europe’s Chip Crisis

Hello and welcome back to Citizen Tech, InformationWeek’s monthly policy roundup. This month, we have to talk about Elon Musk, who yet again, faces SEC charges over his compensation at Tesla; content regulation on social media platforms around the US November elections; the fallout of FTX’s collapse, in Congress and in the European Parliament; desperation over a European Chips Act; and more.

About Elon: Is He Too Rich?

Not an ethical question: a legal one. The New York Times reported that the SEC is looking into Musk’s 2018 compensation package as CEO of Tesla. The package stipulated a package of options that amounted to $50 billion. The SEC has told the Delaware Court of Chancery that the Tesla board bamboozled stockholders into approving this massive compensation.

Almost five years have passed since the deal in question, and Musk’s share of Tesla’s stock has fluctuated since then. At the moment, according to the Times, he owns 14% of the company’s stock, which amounts to almost $90 billion. He sold off about a third of that sum last year.

Tesla has told the court that the 2018 package was justified by Tesla’s performance, was not extreme given revenue in the years thereafter, and involved no dishonesty with investors. Musk, on the stand, as Axios reports, claims to “hate” being CEO of Tesla. The Biden administration in general and the SEC in particular have an obvious bone to pick with Musk. They’re in the mood to slay giants: this month DOJ took on Adobe in an ambitious antitrust case. We’ll see if their case against Musk holds up.

Election Day Tech

US elections are technological affairs, and not just on account of the machines that tally ballots, the subject of various right-wing fever dreams in the wake of Donald Trump’s 2020 defeat. The major social media platforms all worked furiously to contain misinformation leading up to the November 2022 elections, with TikTok banning all political fundraising (via NYT). Meta, which owns WhatsApp, banned ads that discouraged people from voting. YouTube ramped up its campaign against misinformation, not only in the US but in Brazil, ahead of elections there. Gab, on the other hand, defended free speech and refused to censor any political speech whatever.

The effect was hard to read. Trump took to Facebook after the election to accuse Arizona Democrats of monkeying with ballot machines, and the My Pillow CEO railed against a presumed “Biden bump.” But the seething was telling. However, much revanchist, MAGA propaganda slipped through the cracks -- and however much progressive organizations like Media Matters whined about it -- no real red wave arrived. There may be limits to this kind of digital, election year propaganda.

War Bulletin No. 10

Someone send that last point to the Kremlin. Russia, low on materiel, low on trained personnel, chased out of Kherson and waiting for the winter freeze to catch their breath, are trying what they consider other, subtler means of winning the Ukrainian War. Kremlin operatives targeted American voters ahead of this month’s elections with implicitly anti-Ukrainian messages, wondering about the massive cost of military assistance in a period of inflation and precarity. Other messages took the roundabout path, lashing out at rising violent crime rates and Biden’s progressive excesses. It wasn’t unexpected: FBI and CISA issued a warning last month about just this kind of operation. The question is what made this operation so ... lame. We have yet to learn whether the efforts of the legacy social media platforms are responsible for blunting Russian efforts, or whether the populations most vulnerable to these overtures are saturated. In any event, the Kremlin will need a smarter strategy if it wants to turn Americans the way it turns Europeans and Sahel Africans. Federal support for Ukraine continues apace.

Is It The End of Crypto?

The Economist asked that very question. This month, the cryptocurrency exchange FTX collapsed. NBC lays out the whole story of the implosion. FTX was a kind of moneychanger for the various cryptocurrencies, but it functioned as a kind of alternative bank as well, and many users believed the higher interest gains on their investments in FTX’s digital wallet would always be superior to the rates of their traditional savings accounts. Reader, they were not. FTX filed for Chapter 11 bankruptcy this month. On the 16th, 30-year-old CEO, crypto-lobbyist Sam Bankman-Fried -- what a brutal, fitting name! -- told Vox via Twitter DM that he needed a staggering $8 billion “to make account holders whole.” He also admitted that shortly after filing, someone, perhaps a staff member, hacked FTX and made off with hundreds of millions. It’s a bad look, particularly for a lobbyist with a notable disdain for the kind of regulation that central banks and governments the world over would love to throw at the crypto bros if they could. Senator Debbie Stabenow (D-Michigan), chair of the Senate Agriculture Committee tasked with treating with FTX, expressed a combination of embarrassment and quiet triumph in a press memo. “The Committee remains committed to advancing the Digital Commodities Consumer Protection Act to bring necessary safeguards to the digital commodities market,” she said. It must also be embarrassing for the Committee’s ranking member, John Boozman (R-Nebraska), long seen as sympathetic toward crypto; she mentions him by name as “working closely” with her.

Maxine Waters (D-California), chair of the House Financial Services Committee, said that FTX’s collapse caused “tremendous harm” and that Bankman-Fried would appear before her in a hearing. 

Meanwhile, over the water, the European Commission is considering a new crypto tax. Confidential sources told POLITICO that after the $2 trillion losses in Europe’s crypto market over the past year, a single, bloc-wide tax regime is being discussed. In fact, the FTX scare and the 2022 losses are just the latest justification for this: secret talks began in Toulouse, apparently, in 2021. Currently, every EU member state sets its own tax rates and conditions for cryptocurrency; a spokesman for trader Crypto.com told POLITICO that a new, consolidated tax could “bring economic benefit” to the industry.

Can Europe Afford Chips?

The European Chips Act, which would theoretically repeat or better Biden’s CHIPS Act, languishes in committee in the European Parliament; in the meantime, down the Rhine, the Commission can’t afford to keep funding semiconductor manufacturing. POLITICO suggests that the framework, which would disperse some 43 billion euro in public funds to government and private entities, may have been rushed too fast past lawmakers, and is now facing an agonizing scrutiny in the various bodies of the EU, from the Council to Parliament. Member state governments are stirring too, especially the smaller countries in the bloc. Big manufacturing contracts inevitably go to big manufacturing countries, like Germany and France (and Italy, where beautiful Catania will soon be home to a massive silicon carbide wafer plant). But Czechia, among others, is dissatisfied: surely a major European initiative should benefit the entire European Union?

A number of voices have also pointed out that even if the European Chips Act clears committee in record time, it’s still rather underwhelming. It promises 11 billion euro toward R&D; Biden’s plan gave $13.2 billion.

Biden in the Pacific

Biden has met with a number of Asia-Pacific leader during the G20 summit in Bali. On the 13th, he met with the prime minister of Japan and the president of South Korea to discuss (among other things) supply chains. Nothing came out of the announcements except platitudes and indirect warnings against North Korea, but semiconductors can’t be far from his mind. South Korea produces almost a fifth of all semiconductors worldwide, despite recent drops in productivity (via InvestKorea).

A more interesting announcement came a few days later, when he met with Australia and Japan’s respective prime ministers to discuss financing telecommunications across the Pacific rim. The US International Development Finance Corporation and Japan Bank for International Cooperation invested $50 million each in the Australian telecoms form Telstra’s acquisition of Digicel Pacific. Telstra is a former state-owned Australian company; Digicel, based in Jamaica, is one of the biggest mobile phone networks in the world. Telstra stands to gain about 2.5 million new subscribers across the Pacific islands. The unseen actor in this drama is China. All the talk about “a stronger Pacific region” boils down to fending off Chinese overtures, which might otherwise tempt lawmakers in Samoa, Fiji or elsewhere.

Recommended Reading

Wired is running a series about the hunt for infamous cybercriminal known as Alpha02. It’s a riveting story, with lurid villains and lots of drama, but you’ll need Wired credentials. Maybe you can find some on the Dark Web...

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