The Breakdown - The RESTRICT Act Isn’t About Banning TikTok, It's About Expanding Government Powers

Episode Date: March 31, 2023

The movement to ban TikTok in the U.S. is growing. The recently introduced RESTRICT Act in the U.S. Congress is nominally about that, but some are concerned it would significantly expand government powers over the internet.  Enjoying this content?   SUBSCRIBE to the Podcast Apple:  https://podcasts.apple.com/podcast/id1438693620?at=1000lSDb Spotify: https://open.spotify.com/show/538vuul1PuorUDwgkC8JWF?si=ddSvD-HST2e_E7wgxcjtfQ Google: https://podcasts.google.com/feed/aHR0cHM6Ly9ubHdjcnlwdG8ubGlic3luLmNvbS9yc3M=   Join the discussion: https://discord.gg/VrKRrfKCz8   Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW “The Breakdown” is written, produced and narrated by Nathaniel Whittemore aka NLW, with editing by Michele Musso and research by Scott Hill. Jared Schwartz is our executive producer and our theme music is “Countdown” by Neon Beach. Music behind our sponsor today is “Foothill Blvd” by Sam Barsh. Image credit: Chip Somodevilla/Getty Images, modified by CoinDesk.  Join the discussion at discord.gg/VrKRrfKCz8.  

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Big Picture power shifts remaking our world. The breakdown is produced and distributed by CoinDesk. What's going on, guys? It is Thursday, March 30th, and today we are talking about why the Restrict Act is Patriot Act 2.0. Before we dive into that, if you were enjoying the breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation about extremely important issues like the one we are covering on today's show, come join us on the Breakers Discord. You can find a link in the show notes or go to bit.ly slash breakdown pod. All right, guys, well, this is a show that I have been wanting to do all week. Today we are talking about a government proposed bill that potentially represents a huge affront to personal

liberty in the U.S. and which is very popular on both sides of the political aisle. I'm speaking, of course, about the Restrict Act, which while nominally being a way to ban TikTok in the U.S. is actually an incredibly sweeping act that would greatly expand executive authority in a way that many people see as akin to the Patriot Act. So to understand how we got here, let's start with a little bit of background on TikTok. It's no secret that TikTok has exploded onto the scene as one of the most dominant apps of our time. Coming up on half of all Americans now use the app, 150 million people. And the time they spend on it on average grows and grows and grows.

And because of that, when we think about TikTok, we can't just think about it as competing with other social apps, but instead as competing for basically all of people's free time. All the way back in July of 2020, Netflix acknowledged that TikTok was a major competitor. In a shareholder letter around the company's Q2 earnings of that year, they said TikTok's growth is astounding, showing the fluidity of internet entertainment. That analysis ended up being prophetic because by October of last year, TikTok had overtaken Netflix as the second most popular app for under 35s in the U.S., beaten out only by YouTube, which itself has focused aggressively on a short-form competitor to TikTok.

Now, while there might be questions around that sort of growth and increasing dominance in any circumstance, it is TikTok's origins and ownership that have made it such a hot-button issue. Because, of course, TikTok is owned by BiteDance, a Chinese company. China has undeniably become the big bad in American public life. And in fact, there's been a fairly radical shift over the last few years in the American perception of China. According to Pew Research in 2017, the percentage of Americans who had an unfavorable view of China was 47%, as compared to 44% who had a favorable view. So overall unfavorable but fairly close. By 2022, last year, the percentage with a favorable view was down to just 16%,

with 82% having an unfavorable view. These changes were driven by a number of factors, including growing concerns around human rights abuses in China and a broader perception of China as an economic and technological threat to the United States. This certainly played out in the 2020 election, where the one thing Biden and Trump could agree on was taking a quote-unquote tough stance on China. Trump had actually already tried during his term in office to get rid of TikTok. In August 2020, he signed an executive order imposing sanctions against the company, effectively making it so the app couldn't update itself or accept new advertisers. So while not exactly a ban, a de facto name, in that executive order, the Trump White House honed in not only on TikTok's data collection

processes, which were fairly standard across similar platforms, but on who might have access to that data. The executive order reads, quote, This data collection threatens to allow the Chinese Communist Party access to American's personal and proprietary information, potentially allowing China to track the locations of federal employees and contractors, build dossiers of personal information for blackmail, and conduct corporate espionage. Now, that executive order got caught up in legal proceedings and was ultimately reversed when Biden took office, but President Biden still flagged the app as a concern. He ordered the Secretary of Commerce to investigate

the app to determine if it posed a threat to U.S. national security. And this, This was just one of a number of U.S. anti-China measures. One of the more notable pieces of legislation from the past few years, for example, was the Chips Act, which was meant to incentivize the reshoring of the semiconductor manufacturing industry. Anyway, in these subsequent couple of years, there has been continued momentum building around a TikTok ban. In many, if not most states, TikTok has been banned from government computers and phones, and by the end of last year, even some previous opponents of a TikTok ban were changing their minds. Democratic Senator Mark Warner, for example, stated that,

As painful as it is for me to say, if Donald Trump was right and we could have taken action then, that would have been a heck of a lot easier than trying to take action in November of 2022. The sooner we bite the bullet, the better. All of this came to a head over the last few weeks, as TikTok CEO, Show Chu was brought before Congress for what ended up being a grueling, contentious five-hour hearing. I have to say that even for someone who has spent the last five years watching crypto hearings, this one really showed new levels of stupidity and ignorance on the part of U.S. officials. At one point, one of the politicians questioning Chu seemed not to understand what Wi-Fi was or how it worked.

Mike Solana summed this up in his Pirate Wire's newsletter, saying, Given China is a hostile authoritarian superpower and a state of conflict increasingly close to Cold War with the United States, there is concern the company constitutes a national security risk. But people also seem to really hate tech right now. Altogether this produced a kind of outrage-perfect storm. Chu was obliterated. Now, for me, it was fascinating to watch the reactions of TikTok users on TikTok. For many of them, it was their first time actually watching a congressional hearing, and boy, oh boy, were they shocked.

Shocked at the utter ineptitude of the elected officials in charge of making policy that impacted their lives. By and large, their feeling was that TikTok was being unfairly singled out with China as a pretense. And that really the reasons for wanting to ban TikTok had nothing to do with the national security concerns that people were saying it was about. I'm getting a little bit ahead of myself, but to the extent that there is anything encouraging about the whole charade playing out right now, it's that a generation that hasn't really been mobilized so far is starting to take notice of important political processes that will shape their world. I was discussing the hearing with a China scholar friend of mine who said, it would be nice if they would realize there is a bipartisan cabal of old politicians trying to start a war with China in their name, and that this would be very bad if,

as it very well should be, it can be avoided without surrendering completely to dictatorship. But alas, as many TikTokers feel this way, the view remains few and far between with actual elected officials. This is embodied in the proposed legislation to address the TikTok issue, the Restrict Act. Because the U.S. can't avoid being cutesy with titles, Restrict in the Restrict Act stands for restricting the emergence of security threats that risk information and communications technology act. It was introduced by Mark Warner in March and would grant the Commerce Department sweeping powers to disrupt the ability for companies operated by quote-unquote foreign adversaries to function in the U.S. The bill received glowing praise upon being introduced from the White House.

National Security Advisor Jake Sullivan wrote in a press statement, The information and communications technology products and services supply chain is integral to the lives of Americans and the functioning of U.S. businesses. This bill presents a systemic framework for addressing technology-based threats to the security and safety of Americans. This legislation would provide the U.S. government with new mechanisms to mitigate the national security risks posed by high-risk technology businesses operating in the United States. Critically, it would strengthen our ability to address discrete risks posed by individual transactions and systemic risks posed by certain classes of transactions involving

countries of concern in sensitive technology sectors. This will help us address the threats we face today and also prevent such risks from arising in the future. While the bill is ostensibly aimed at enabling the Commerce Department to ban TikTok, the additional powers introduced are much broader in nature and fundamentally placed the idea of a free and open internet at odds with notions of U.S. national security. Under the legislation, for example, the Commerce Department would be empowered to take measures against information and communications technology products or services that are owned or controlled by foreign adversaries. These measures range from forced investment of companies right up to outright bans. And to ensure a ban is effective, the legislation would also allow

criminal charges to be brought against people circumventing bans, i.e. using VPNs, with hefty penalties of up to $1 million in fines and 20 years in jail. This penalty raised huge alarm bells from critics of the bill that were concerned that individual users could be subject to massive penalties. sponsor, Senator Warner, said that this wouldn't be the case, stating via his communications director, quote, under the terms of the bill, someone must be engaged in sabotage or subversion of communications technology in the U.S., causing catastrophic effects on U.S. critical infrastructure, or altering the result of a federal election in order for criminal penalties to apply. This statement comforted basically no one who sees this bill for what I believe it is, which is a huge

and sweeping expansion of executive powers predicated on nebulously defined justifications that are highly abusable in practice. And if this theme of introducing sweeping powers presented as addressing a fairly narrow national security threat is giving you flashbacks to the early 2000s, you're not alone. Many critics have compared this to the legislative style and language that surrounded the introduction of the Patriot Act in 2001. The Patriot Act was sold to the American public as an anti-terrorism act and was broadly supported in Congress and by the public for that reason. After more than 20 years, it has become clear that while the Patriot Act gave intelligence agents tools to combat terrorism, the cost to the public was gigantic. The legislation paved the way for huge changes in what we find

acceptable when it comes to surveillance of the American public to say nothing of the presumption of innocence before guiltiness. The concern is that the Restrict Act is cast from a similar mold, sold to the American public as a righteous piece of legislation to protect them against serious harm from a foreign national security threat, but realistically so broad in its application that the sweeping powers it affords the administrative state could be used to limit freedoms and undermine constitutional rights. State Freedom Caucus Network comms director Greg Price writes, The bill to ban TikTok is absolutely terrifying. It gives the government the ability to go after anyone they deem as a national security risk, at which point they can access everything from

their computer to video games to their ringlight. This is a Patriot Act for the internet. Believe it or not, it gets even worse. If it finds you in violation, they can put you in jail for 20 years, find you $1 million, and seize your property. They can also deem any foreign government and adversary without informing Congress, and everything they do is not subject to FOIA. If this was about banning TikTok, they would pass a bill that simply bans TikTok. But the Uniparty is trying to create the same system of domestic spying they did after 9-11, for the internet, but on steroids. Mike Green writes, it's a terrible bill. The bill does everything except ban TikTok. Performative theater that shouldn't pass and hands insane power to unelected appointees. Vote against anyone

who sponsored it. GOP Housemember Warren Davidson writes, Freedom surrendered is rarely reclaimed. The Restrict Act is focused on creating a domestic police state, not protecting us from international threats. This is a domestic threat to our constitution and our way of life. It cannot pass and the executive branch cannot be permitted to implement it. Now a bit more from the Mises caucus on why this is so threatening. They write, The Restrict Act is not limited to just TikTok. It gives the government authority over all forms of communication, domestic or abroad, and grants powers to, quote, enforce any mitigation measure to address any risk to national security now and, in quote, any potential future transaction.

So what happens if you were designated a national security threat? What can they access of yours to confirm it? Everything. Notice the preemptive attack on quantum encryption in there, too. It also allows the Director of National Intelligence and Secretary of Commerce, the authority to universally designate new foreign adversaries without notifying Congress and a 15-day window to notify the president. It also requires a joint resolution of Congress to overturn. If you recall from before, foreign individuals can now also be U.S. citizens that are deemed to be a national security threat.

Once designated, the bill grants authority to enforce any action deemed necessary to mitigate the threat, with no due process and few limits on punishment. Now, it's not just folks on the right side of the aisle who are asking questions about this. Representative Alexandra Ocasio-Cortez, AOC, put forward a critique of the logic behind a potential TikTok ban in a TikTok video. In that video, she highlighted that the issue of excessive surveillance isn't just a TikTok problem. She said, quote, it doesn't really address the core of the issue, which is the fact that social media companies are allowed to collect troves of deeply personal data about you, that you don't know about without really any significant regulation whatsoever.

In fact, the United States is one of the only developed nations in the world that has no significant data or privacy laws on the book. Still, unfortunately, these politicians on both the right and the left seem to be pretty firmly in the minority right now. Unsurprisingly, Bitcoiners have been some of the first on the scene to raise awareness about the problems of this bill. Some of them have suggested that it might ultimately end up being used as a tool to target crypto. U.S. Space Force major Jason Lowry says, I don't know how else I can be more explicitly clear with the public about without getting in trouble. Your First Amendment rights to free speech will not protect you from government regulators who are actively maneuvering to ban Bitcoin under the argument that it represents a threat to national security. CoinCenter also published a broad critique of the Restrict Act this week, covering not only the impacts on the crypto industry, but also concerns around the features of the bill which would undermine constitutional rights.

They wrote, quote, although the primary targets of this legislation are companies like TikTok, the language of the bill could potentially be used to block or disrupt cryptocurrency transactions and, in extreme cases, block Americans' access to open source tools. or protocols like Bitcoin. According to CoinCenter, the bill duplicates many of the powers that already exist within the Treasury's sanctions body OFAC, but without the same safeguards. OFAC sanctions decisions require that a state of emergency be issued by the White House before any action is taken. While the Restrict Act would allow the Commerce Department to take actions that look very similar to sanctions without such a high standard, coin center question why these broad powers to criminalize transactions need to be duplicated across multiple governments. While OFAC sanctions contain a carve-out for transactions primarily dealing with information

and protected speech activities, the Restrict Act does not protect free speech in the same way. What's more regarding due process, the Restrict Act does not allow for review under the Administrative Procedure Act, limiting the ability to challenge decisions in court. In CoinCenter's opinion, the avenues for review are so narrow that decisions could not be challenged under statutory or procedure grounds, instead needing to be argued on constitutional grounds. Coinsenters summed up their position that, in their view, the Restrict Act, quote, is deliberately targeted at restraining transactions related to information and information technologies. This targeting may mean that the Act is facially unconstitutional and should it become

law we expected to be challenged as such. They also committed to bringing a court challenge on constitutional grounds if the law was ever used to sanction open source crypto technology. Now, as for me, my concern is not primarily the crypto implications just yet, even if they are there. It's the everything implications. It's the expansion of power implications. The battle around how much control governments have when it comes to technology and speech on technology platforms

has been ongoing for 30 years and is going to do nothing but heat up as the artificial intelligence era really hits. One never far away from the news example is law enforcement constantly wanting back doors to encrypted communications platforms in order to quote-unquote fight crime. That is big time on display right now in the EU. In May of last year, the EU Commission put forward a proposal that would require all internet communications providers to search all private chats, messages, and emails automatically for suspicious content. The nominally stated aim is to detect child exploitation material, but the potential for misuse and expansion of scope using such powerful surveillance is pretty obvious. There are

tons of examples of tech platforms experimenting with this sort of AI-powered dragnet surveillance and how often it leads to false accusations and false detection. And even, even Even within that, to the extent that it does uncover criminality, we're still left with the question about how much freedom to give up in the name of safety. When the EU proposal known as chat control was opened up for public comment, the results were overwhelmingly negative. Just 34 of 414 comments were in favor of the policy, with 24 of those positive comments coming from child protection NGOs.

In June, a letter signed by 118 other NGOs was sent to the EU Commission opposing the proposal. Now, bringing it back to the U.S. and to the Restrict Act, if I have one wish for now, it's just to discuss the things going on here on their own terms. It's fine to debate a TikTok ban. There are tons of issues to consider there. But by introducing this sweeping restrict act, the political class has now bitten off an altogether different fight. Glenn Greenwald wrote earlier this week,

The key lesson of 9-11 was that we allowed the U.S. government to seize excessive powers in the name of fighting al-Qaeda. The proposed bill extends far beyond TikTok. Americans know the risks of using TikTok and are still choosing by the millions to use it, Barring them from doing so is a major infringement of autonomy and arguably their First Amendment rights to access info. But at least look at the bill. It empowers the USG way beyond TikTok. We've spent four years worrying that the U.S. government is trying to control the internet and censor the content Americans can hear.

Now we're ready to hand it the power to ban entire platforms at will? At least appreciate how extraordinary this power is at best. The belief that China is a threat to the U.S. does not mean every government demand for power in its name is justified. Just as the post-9-11 rage for Al-Qaeda did not justify every U.S. government, policy enacted in the name of stopping terrorism. I'm aware that both parties, the Biden White House, and much of the political class support a TikTok ban. That's fine. It's democracy, and courts will decide constitutionality. But this should at least be a reasoned process, with the scope of the law understood. Not just China is bad. One last point. Both China and Iran have banned or severely restricted Google and Facebook based on similar concerns. They spread disinformation to our citizenry,

use it to destabilize us, spy on us. They were condemned as despotic, an attack. to control the flow of information. And indeed on this, Bologi made much the same point. He writes, The Restrict Act is the American Great Firewall. Become China in the name of beating China. So guys, those are the stakes. That's the 101 on the Restrict Act. Get informed fast because the battle is heating up right now. Until tomorrow, be safe and take care of each other. Peace.