Wolfgang Münchau is a columnist for DL News. He is co-founder and director of Eurointelligence, and writes a column on European affairs for the New Statesman. Opinions are his own.
Just wait for it. A European Union country will soon issue an arrest warrant for Satoshi Nakamoto, who will stand accused of having invented a platform which he has persistently failed to control.
The crypto industry should be very concerned about the arrest in Paris of Pavel Durov, the founder of Telegram. It’s not only the fact that Telegram is the second most popular platform for the crypto industry after X.
It’s the fact that what happened to Durov could soon happen to any crypto CEO — and indeed any tech entrepreneur.
Durov was arrested, broadly speaking, because of his failure to fight illegal content on his social media platform. The EU Digital Services Act makes operators of digital platforms responsible for the content.
Thierry Breton, the EU industry commissioner, even went so far as to write to Elon Musk earlier this month.
He told the tech billionaire that his interview with former President Donald Trump would constitute a violation of the act, presumably on the grounds Trump disseminates falsehoods the moment he opens his mouth.
Brussels later denied that it had given Breton permission to send the warning to Musk.
Breton, a Frenchman, is the leader of the EU’s anti-digital crusade within the European Commission. His country has gone further to incorporate these principles into its criminal law.
It is one thing for the EU to impose a fine on a company in breach of the digital services act or an EU regulation.
It is another for a CEO to face criminal charges for failing to moderate a digital platform.
If you applied the same principle to the world of crypto, it would make operators of a crypto exchange such as Binance or Coinbase responsible for every transaction on them.
Anti-crypto
The problem is encryption. Telegram offers its 900 million users the ability to encode messages — albeit not the same end-to-end encryption that has become the standard in apps like WhatsApp.
The EU’s position is anti-crypto in the widest sense — anything that avoids the clutches of the authorities.
The only immediate way around this problem is for tech companies not to set physical offices in the EU, and for executives not to travel to the EU.
Another tech company currently running into trouble is Sam Altman’s Worldcoin.
The data protection authority in the German state of Bavaria is entering the final weeks of a two-year long audit of Tools for Humanity, a crypto-biometrics project co-founded by Worldcoin.
The Bavarians suspect, and will likely conclude, that Altman’s project violates the EU’s General Data Protection Regulation, or GDPR.
Tools for Humanity’s big idea is to scan people’s retinas to give them a “World ID” — to identify yourself as a human being online.
Those who take part in the project can claim coins from Worldcoin’s cryptocurrency.
The reason the Bavarians got involved with Altman’s Worldcoin is that Tools for Humanity, which is a manufacturing company that produces the physical scanners, has offices in Bavaria.
Herein lies a lesson: Try to stay outside the EU.
In the long-run it is cheaper to let Europeans import your products, or access your services, than producing from inside the EU when the price for this is the abandonment of your business model.
I am absolutely not surprised that the Worldcoin project, too, risks falling foul of European regulation.
GDPR
I’ve been watching Europe’s drive towards an overtly hostile regulatory environment for digital industries for some time.
GDPR is where it began. The EU’s data protection regime came into force in 2016. GDPR is not only what gives you the annoying cookies notifications on websites.
It has imposed a massive bureaucracy on businesses, especially small businesses, and has become a real obstacle for the EU to become a leading force in AI, which of course relies on the availability of data.
The EU’s drive against all things digital has culminated in the Digital Service Act last year, and this year’s regulations on AI and crypto.
The EU has virtually no skin in the game in the tech industry, but it thinks it can set the global regulatory pace. It surely used to in the past.
The EU has more than 500 million of mostly relatively wealthy people. But its economic weight in the world isn’t as big as it used to be.
This is especially true if we measure income in terms of purchasing power, as the World Bank does — you arrive at very different statistics than official dollar-based metrics.
Based on these statistics, Russia is much bigger than the Western media think, and the EU is much smaller.
The EU only accounts for about 15% of world GDP under the purchasing power metric. This isn’t big enough to hold the high-tech world hostage forever.
Impossible to control
An EU with a shrinking population, economic stagnation, and hostility towards the biggest growth industry on the planet is not going to dictate regulatory standards.
The idea of the EU as a regulatory superpower forever is a delusion. But for now, there are enough Europeans who believe in it.
The way to defeat the EU is to use decentralised platforms.
They can’t do anything about Bitcoin. But they have a legal lever to act against any company that operates inside the EU, or anyone foolish enough to travel to the EU.
This is how they get you.
A decentralised social media platform is impossible to control.
Breton would have no one to write his silly letters to. An arrest warrant for Nakamoto would be a perfect ending to this madness.
