Law Decoded: Tech as an Arena for International Conflict, July 31–August 7

As Trump clamps down on Chinese social media in the U.S., tech in general becomes subject to nationalism.

Every Friday, Law Decoded delivers analysis on the week’s critical stories in the realms of policy, regulation and law. 

Editor’s note

The U.S.–China trade war continues its brazen spillover into tech. In response to concerns over where data from TikTok and WeChat was going, President Trump sent out twin executive orders banning both applications last night. 

The new action is distinct from, for example, squeezing Huawei out. Huawei’s hardware is tied up in international supply chain and military networks, forming a more obvious security risk. TikTok and WeChat are consumer apps, more occupied with viral dance videos than top secret intelligence.

More obviously salacious is the prospect that Microsoft may end up buying TikTok at what you could generously call the wholesale rate, provided it pays the government what you could cynically call its cut for muscling out a competitor. 

Social media has been a critical political arena for a long time, even before earlier administration attacks on home-grown social media like Facebook and Twitter. Regarding TikTok and WeChat, their data-gathering practices are genuinely cause for concern, but these executive orders don’t read like good-faith efforts to protect citizens.

Broadly, we are witnessing tech become a place for nations to duke it out — not for the first time, but tech’s heavy hitters of the 21st century have until recently portrayed themselves as more utopian and international. Something Gene Roddenberry would’ve thought up. Which is a vision that still reigns in conversations about, say, Bitcoin. But as various government agencies take pains to onboard blockchain, and as the Space Force steals the logo of the Federation, it is an open question of how this all plays out. 

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Blockchain analytics brings in the Twitter hacker in 16 days

Using blockchain analytics and Coinbase KYC documents, the FBI was able to track down three suspects in the July 15 Twitter hack, leading to arrests on July 31. 

Many in the crypto industry noted that the Bitcoin blockchain enabled law enforcement to track down the alleged perpetrators and make arrests incredibly quickly, with a turnaround that cash would have made unlikely. 

Comically, hearings to reduce Graham Ivan Clark $725,00 were cut short by an aggressive Zoombombing campaign that replaced many of the screens in the virtual hearing with pornography. 

Less comically, the primary suspect, 17-year-old Clark, faces 30 counts and up to 200 years in prison for the hack, which netted $117,000 in Bitcoin. 

For comparison, Jonathan Mattingly, Myles Cosgrove and Brett Hankison shot and murdered Breonna Taylor in her bed on March 13. All three remain free. 

CryptoMom will stay on as SEC commissioner 

Following perfunctory confirmation hearings before the Senate this week, Hester Peirce is set to stay on as a commissioner at the Securities and Exchange Commission until 2025. 

Familiar to Cointelegraph’s readers as “CryptoMom” due to her long-term interest in protecting the industry, Pierce is behind a proposed safe harbor policy that would protect new blockchain networks that are transitioning from centralized to decentralized formats. 

Recently, Peirce publicly came down against the SEC’s attack on Telegram’s TON, one of the most famous legal disputes over whether a blockchain network and its native tokens were independent of the team behind their initial launch. 

Peirce initially joined as commissioner in 2018, filling a seat that had been vacant since late 2015 for a term that was formally supposed to end this past June. Longtime SEC attorney Caroline Crenshaw will round out the roster of five commissioners. 

The Blockchain Caucus keeps pushing the IRS

In a recent letter, four congressmen asked the IRS to reconsider plans to tax staking rewards as income. 

The latest letter is in some sense a political “per my last email” ping following a similar request in December for clarity from the IRS on taxing crypto-specific events like hard forks and airdrops. Both letters feature signatories from the congressional Blockchain Caucus, as well as representation from the Fintech Task Force. 

For crypto insiders, hard forks and staking are worlds apart. Bear in mind the overall mission of the Blockchain Caucus. Though its members have introduced legislation pushing for greater use of blockchain technology in a wide range of fields, the caucus itself doesn’t have the status of a subcommittee and so doesn’t formally consider new laws. Most of the Blockchain Caucus’ work right now falls under the category of education. 

In the halls of power, “education” often translates into persistent on-message hassling. The IRS has been slow to respond to crypto with consistent guidance, though it has worked to expand its ability to track transactions and demand more money. It’s really only through outlets like the Blockchain Caucus that the IRS has any incentive to give the crypto industry a voice at all.

Further reads

In an opinion piece for the Financial Times, Tom Braithwaite breaks down the links between Chinese and American tech sectors and the impossibility of fully separating the two. 

For Electronic Frontier Foundation, Adam Schwartz warns of the privacy dangers of California’s proposed bill to mandate blockchain-backed COVID-19 test certification.

Lawyers for Manatt, Phelps & Phillips write on the limits to recent authorizations for federal banks in the United States to custody crypto.

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