It is increasingly clear to me that running a globally compliant Internet business will soon be, if it is not already, impossible in several important domains. In two specific spheres, crypto and publishing, the problem is most acute. As the post-war international order fractures, so too does the Internet. The result is that soon Internet businesses in crypto or publishing will have no choice but to violate the law somewhere if they want to continue to exist.
In the case of crypto, there are generally three regimes: (A) the United States and OECD; (B) BRICS; (C) Rest of World (“ROW“).
Although there is substantial variation within the U.S./OECD crowd (for example, the United Kingdom and Australia do not generally regulate ICO coins as transferable securities whereas the U.S. and Canada do), the general understanding is that the government has a substantial interest in regulating practically every touchpoint or intermediary which facilitates access to blockchain protocols and even, in the case of recent U.S. Securities and Exchange Commission noises around exchanges and/or U.S. treatment of the Tornado Cash smart contract, even access to protocols without access to intermediaries, even if overseas operators cannot be accessed directly from the U.S. but need to be accessed via VPN.
The result is that crypto businesses fundamentally cannot do in the United States what they are permitted to do in many other places, meaning crypto cannot be used in the United States in the manner it is used in other places. The U.S. requirement to treat every token like a full blown security, and all of the intermediary re-insertion to the process that entails (transfer agents, broker-dealers, custodians, ATSs, etc.) defeats the entire point of using the technology in the first place. As a result, a lot of crypto companies carrying on certain regulated activities will wind up having two different crypto businesses – an American-only offering and a ROW offering – because the irrationally harsh approach American regulators are taking to the space will make it impossible to market the ROW product to Americans on an economically viable basis, if at all.
BRICS countries (Brazil, Russia, India, China, South Africa) on the other hand, do regulate crypto but pair that regulation with slightly weaker and/or willfully blind and/or corrupt enforcement capacity. India is the most OECD-like of this group. Brazil is a very close second although to the observer trained in Anglo-American jurisprudence, the “Calvinball Constructionism” utilized by the Brazilian Supreme Court – which seemingly makes up new law from thin air every time it encounters a state of affairs it doesn’t like, without any requirement for there to have been a case pending before it first – appears very strange, and such volatility is likely to scare American business away.
Russia and China on the other hand appear willing to look the other way to permit activity within their borders that keeps them “in the game” while also possibly frustrating the geopolitical aims and global reach of their main rivals, the United States.
So we see headlines about countries like China banning crypto and Bitcoin mining, but failing to enforce it – the mining continues on.
Or we see entrepreneurs like Alexander Vinnik of BTC-E operate freely in Russia, get picked up in Greece for violating all of the laws in the United States, and now years later we learn Russia is reportedly considering pulling him back home as part of a prisoner exchange. If such an exchange came to pass, it would tell me that Vinnik’s failure to obey the U.S. Bank Secrecy Act – and Russia’s attitude towards compliance within its own borders generally – has less to do with the actual content of the laws on their books and more to do with whether the activity serves Russia’s interest in undermining America’s control of the global financial system.
In the case of publishing, similarly, each country is charting its own course regarding Internet censorship and state control of published materials on the Net. Generally speaking, there are two regimes: (A) the United States and (b) ROW. In this matrix, however, the United States is the freest jurisdiction in the world, with strong First Amendment protections for sites wishing to host user generated content and for the content users choose to post, as well as the affirmative defense for platforms which host that content from civil actions in the form of 47 U.S.C. § 230(c) (commonly known as “Section 230”).
No power on Earth can force an American company running an application on American metal to censor even a single bit of user generated content which is lawful in the United States.
The ROW, on the other hand, has a variety of different regimes with different rules, but one thing in common: most of the ROW confers the right on the state to order platforms to take down political content which would be lawful in the United States. This is the case with Germany’s NetzDG, with the E.U. Digital Services Act, with the Brazilian Paim Law or recent nation-wide ban of the Telegram app, and, if enacted, with the United Kingdom’s Online Safety Bill.
At the moment, companies such as Twitter generally comply with these laws by removing content or blocking it in the subject jurisdictions but allowing it to remain accessible from elsewhere, such as in the United States. As the world splinters, however, I expect that countries’ censorship regimes will become more demanding and that erasure, not obscuration, will be required. Much like the U.S. SEC/CFTC/DOJ/WTF/BBQ have problems with VPNs when it comes to digital money, so too will the Europeans when it comes to speech. Companies will have no choice but to fold to every petty takedown demand or fall out of compliance.
Combine with this with conflicting data privacy regimes, or laws in places like Poland which bar companies from censoring social media users, or a desire to simply not engage in political censorship and… well, you get the idea. You can’t comply with conflicting requirements at the same time, and you can’t run a business that has American values in a European country.
The third major category which the world might fumble on technological progress, but where it’s still way too early for there to have been anything approaching a coherent regulatory proposal emanating from our idiot leaders, is the field of Artificial Intelligence. I suspect that from a regulatory perspective A.I. will likely fall into the “publication” category in the United States. Thus, barring some political disaster like a Butlerian Jihad, the First Amendment and Section 230 will do their thing and America will have another chance to lead the world there.
I am of course speaking in generalizations here. Any one of the statutes mentioned in this post could merit an entire book’s worth of writing by itself, so read the above not as specific conclusions following rigidly structured analysis but rather as hunches based on how these laws feel, to me, as I have been getting my hands dirty with them.
Speaking and transacting combined represent the overwhelming majority of human activity. It occurs to me that America is making the gravest of strategic mistakes by choosing to be the world’s leader when it comes to decentralized, digital publication of words and the expression of ideas, but not the world leader – or even a major player – when it comes to the adoption of decentralized, digital money.
In case it is not clear to our politicians by now, let me be frank: technological prowess is the only issue that matters. The brightest possible future belongs to the country which decides to become the most technologically advanced, and the country that does that is the one that embraces total freedom for its people. Not in one category of technology or another, but in all of them at the same time.
This – with an assist from Alan Greenspan – is what lit the fires of the American economy in the megaboom years of the 1990s and 2000s, and could do it again today. America could own the 21st Century. Instead we’re printing to infinity and blowing our lead. What a shame.
