Stock charts
Image: Greg Ory, Ataur Rahman and Protocol

Tech needs to rethink policy in a cooling economy

Protocol Policy

Hello, and welcome to Protocol Policy! Today, we look at how the potential market plunge should impact your policy priorities; Treasury Secretary Janet Yellen called for stablecoin regulation after one of the most important assets in the space experienced a mysterious depegging; and privacy experts are worried about the end of end-to-end encryption after the EU unveiled aggressive plans to combat CSAM.

Policy shifts for a down economy

Nothing disrupts policy agendas quite like a recession. That’s doubly true for a potential recession taking shape six months before midterms. Politicians will be eager to quell the frustration that comes with inflation, diminishing job prospects and plummeting portfolios — all of which are converging in the aftermath of a two-year lockdown that eroded public trust in elected officials, the media and the scientific establishment.

Tech will be a popular target in a down economy. The historic formula for addressing recession anger? Punch up. And by those standards, there’s no target more punchable than tech, which emerged from the pandemic stronger than ever.

That means the tech policy environment is primed to undergo a shift, though the magnitude depends on where markets go from here.

Hiring practices will receive more scrutiny. There are already signs of tech firms trimming labor costs, such as the hiring slowdowns at Meta, Netflix, Robinhood and Uber.

  • Slowing hiring is one thing, but tech companies also seem to be relying more heavily on outsourcing employment to China and India. The increased prevalence of remote work, steep H-1B visa restrictions and the shortage of skilled U.S. workers are all driving this trend, according to the Wall Street Journal.
  • The optics of outsourcing are never popular domestically, but that could be particularly true in a recession. Republicans are also primed for a sweeping victory in midterms, and the Trump wing of the party has placed a strong emphasis on domestic hiring and cracking down on H-1B workarounds.

The crypto lobby has a harder case to make. Crypto skeptics stand on firmer ground now that NFT and crypto markets have been battered. That puts a higher burden of proof on the industry and its lobbyists at a time when the regulatory environment is particularly malleable.

  • The crypto lobby has been pushing New York to ease restrictions on BitLicense requirements, which limit the types of digital assets that centralized exchanges can offer. With many overzealous investors facing financial ruin from crypto losses, restrictions on asset types look like a responsible and perhaps even necessary guardrail.
  • Similarly, it’s much harder for Fidelity to argue bitcoin should be allowed in 401(k)s when bitcoin lost around half its value in a six-month stretch.

Politicians will have a harder time selling the optics of tax subsidies, which have greatly benefited the tech sector in recent years. If a recession hits hard, the subsidies-for-expanded-tax-base model will likely become less popular. The headlines practically write themselves: “Trillion-dollar company receives taxpayer subsidies while you suffer.”

  • We’ve seen this narrative play out with the anti-bailout movement that came out of the 2008 financial crisis.
  • It’s difficult to say whether this dynamic would translate into reduced subsidies — it could just mean fewer oversized-check photo ops at press conferences.
— Hirsh Chitkara (email | twitter)

In Washington

Treasury Secretary Janet Yellen said it would be “highly appropriate” to set a goal of passing stablecoin legislation this year. Yellen was speaking at a Senate Banking Committee hearing, where she expressed concern about the UST stablecoin. While stablecoins are supposed to have a fixed ratio to a given currency, UST became depegged, dropping from its value of $1 to as little as $0.23.

The Senate appears poised to confirm Alvaro Bedoya as the fifth FTC commissioner today after months of false starts, long recesses, procedural obstacles, failed courting of extra votes and unexpected COVID-19 absences. He’s expected to get confirmed by the thinnest of margins. It’s not like most of the Biden tech agenda is riding on the vote or anything.

Justice Department antitrust division head Jonathan Kanter is being kept away from certain matters involving Google while the department decides if he should formally recuse himself, according to a report in Bloomberg. Google sought Kanter’s recusal over his prior longtime work for company foes who pushed for the U.S. antitrust lawsuit against Google. Kanter allies say his lawyering didn’t cross into the territory requiring recusal under the rules, and that he didn’t switch sides on any issue.

U.S. Immigration and Customs Enforcement has an extensive ability to look into DMV and utility records, according to a new report from Georgetown University’s Center on Privacy and Technology. ICE can look into certain data directly, but also obtains extensive records from private data brokers, the report found. Overall, ICE’s efforts, which include facial-recognition searches on roughly a third of adults’ drivers’ licenses, have cost billions since 2008.

If you’ve ever been knocked off the sofa when “Only Murders in the Building” goes to commercial, a group of Democratic lawmakers is with you. They want to extend the law against overly loud TV ads to include streaming services like Hulu.

In the states

Connecticut’s governor signed the state’s data-privacy legislation into law just weeks after Utah put in place the fourth such state law. Companies have grown increasingly antsy about the divergent rules as state approaches proliferate and Congress continues to shrug as if it’s helpless. Tech interests have succeeded in making recent state statutes more friendly, but Connecticut’s measure bucked the trend and won plaudits from consumer groups.

Federal appeals court judges deciding whether to let a Texas law punishing social media for alleged anti-conservative bias proceed seemed to struggle with basic tech facts, like … whether Twitter is a website.


New polling shows that American voters do not see regulating tech companies as a priority. Their top concerns are strengthening the national economy (38%), followed by controlling inflation (37%). By contrast, only 5% of respondents prioritized regulating tech companies.

Learn more

On Protocol

The EV adoption tipping point has arrived, according to ChargePoint CEO Pasquale Romano, who conducted a Q&A with Protocol. Romano said the EV charger market was experiencing a demand shock rather than a supply shock. “There's plenty of material in the Earth to support what we're doing,” he said.

The days of three competing offers for software engineers seem to be nearing an end. It’s easy to overreact, but it’s still probably safe to assume that every competent engineer will be able to find work. “There is a slowdown, just compared to how hectic things were like six months ago,” one recruiter told Protocol.

Around the world

The European Commission announced plans to have tech companies proactively scan and report CSAM. The commission also said it will ask companies to use age verification, deploy AI to detect language patterns for grooming on messaging services and scan user posts for signs of abuse. Critics argue the plan would require mass surveillance and force companies to break end-to-end encryption. One cybersecurity academic called the proposal “the most terrifying thing I’ve ever seen.”

The U.K. government announced plans to develop its own data privacy bill, confirming a coming departure from GDPR post-Brexit and potentially endangering data flows to the continent.

Meta called a German antitrust order “clearly flawed” after the watchdog found Meta violated EU data protection rules by collecting user data without consent.

In the media, culture and metaverse

Match Group sued Google, alleging various violations of the antitrust laws and saying it was Google’s “hostage.” Google shot back that the Tinder and Hinge owner just didn’t want to pony up for the “significant value” of being on Android. If this all sounds like Epic suing Google, or Match’s successful complaints about Apple in the Netherlands, congrats, you’ve been paying attention.

Elon Musk said he’d let Trump back on Twitter, calling the initial ban a “morally bad decision” that undermines trust in the platform. “If there are tweets that are wrong and bad, those should be either deleted or made invisible, and a suspension — a temporary suspension — is appropriate, but not a permanent ban,” Musk said at the Financial Times’ Future of the Car summit.

Content moderators in Kenya are accusing Meta of union-busting, privacy violations and poor working conditions. The lawsuit was filed on behalf of a content moderator who claims he was not properly informed about the nature of the role and suffers from severe PTSD as a result of the work.

In data

85 hours per week: That’s how much time U.S. TikTok employees spent in meetings, the Wall Street Journal reports. The article details a grueling work culture that shows, in part, a clash between the work cultures in China and the U.S. “I actually think I developed a sleep disorder from working so late into the evenings,” one former employee said in a YouTube video recounting the employment experience.


New polling shows voters' top tech policy concerns are cybersecurity and data privacy. Only 7% of respondents prioritized antitrust action and 1% prioritized changes to app store rules. In fact, the majority (58%) believe the pending tech antitrust legislation would cause more harm than help to consumers.

Learn more

RIP iPod

More than two decades after its 2001 debut, the iPod is being discontinued. Apple announced the move on Tuesday, comforting enthusiasts with the assurance that “the spirit of iPod lives on,” as Apple marketing chief Greg Joswiak put it.

Thanks for reading — see you Friday!

Recent Issues