Jenny Leung is a blockchain and fintech attorney at Blakemore Fallon PLLC dba Ketsal.
This year, 2020, is the year social media institutions became systemically important.
This term, “systemically important,” typically describes a financial institution whose failure poses a significant threat to the economy and is thus "too big to fail." Systemically important financial institutions (“SIFI”) have been subject to additional regulatory scrutiny.
If certain social media institutions were to fail today, their failure would pose a significant threat to society due to their outsized influence, size, reach, society’s co-dependence on them and “their power to shape the interpretation of public events.” These systemically important social media institutions (“SISMI”) have become so influential and embedded in society their failure may cause the economy to suffer.
But that doesn’t necessarily mean the solution is as simple as building decentralized alternatives, as some technologists have suggested, or pursuing antitrust action, as outlined in Wednesday’s congressional investigation into Big Tech’s anti-competitive behavior. The threats go much deeper than that.
Recent phenomena highlighted SISMI’s helpful influence during the COVID-19 pandemic: the ongoing Black Lives Matter movement and the Twitter hack of July 2020. Society now depends on SISMIs to keep businesses and influencers afloat, to support political movements, to document protests and police brutality, to livestream everything from yoga classes to conferences, to provide live tornado warnings, to break news, to propagate political rallies, to expose violent rioters, to hold police accountable and to render a verdict as to what company, product or person should be “canceled.”
During the pandemic, the reliance on SISMIs has grown as businesses shut their doors, switched to online delivery and online streaming and requested virtual donations to keep them alive. As New York City found itself paralyzed under Pause and Curfew, I found myself turning to Instagram and Facebook for updates when neither Google Maps' opening hours nor Seamless were reliable. I was glued to the Citizen App for live updates as the protests marched through my neighborhood and past my doorstep.
As confirmed by Twitter itself, hackers took control of 45 accounts, including those of Barack Obama, Joe Biden, Elon Musk, Kim Kardashian and Vitalik Buterin, and sent tweets that tricked followers into sending bitcoin to the hacker’s bitcoin address. While only 12.87 bitcoin (approximately $142,000 at press time) had been sent, the real dangers lie in the fact that (1) hackers gained site-wide admin access and tweeted publicly from prominent accounts with global reach and (2) the hackers were able to access and download potentially sensitive unencrypted direct messages.
These events highlight society’s increasing dependency on mega-platforms for matters ranging from business to finance, justice and politics. We may approach a situation where a political figure has a voice across every social media platform but their opponent may have been banned on the same influential platforms, with no formal appeal process available. As Zoomers, raised on social media, begin to reach voting age, the banning or censoring of political figures and public events may become a real issue as SISMIs engage in more active censorship and control.
Despite its growing importance, “social media inclusion” doesn’t quite have the ring of “financial inclusion.”
Bitcoin and decentralized finance applications have been gaining traction on the principle that everyone in the world deserves access to financial services. It may only be a matter of time before an unstoppable, decentralized and workable social media platform provides everyone with the ability to have a voice.
If social media institutions have become systemically important, governments, regulators and political leaders should recognize how tightly intertwined SISMIs have become with society and the economy and acknowledge the risks that come with this marriage.
Some pundits noted the Twitter hackers could have started a war between world leaders, incited violence, manipulated the markets or created social panic. The latter actually occurred in 2013 after hackers tweeted from the account of the Associated Press, saying the White House had been hit by two explosions and that President Obama was injured, sending the U.S. stock market into freefall. We almost saw history repeat when the Twitter hackers actually hijacked Barack Obama’s Twitter account earlier this month.
Once SISMIs pose a bigger threat to the economy than SIFIs (whether directly through markets or indirectly through civil unrest), it may already be too late to be cautious about their influence. While Wednesday’s congressional antitrust hearing was a good start, the issue of antitrust is only one item in a growing list of problems. Whether the solution is more regulation, breaking up SISMIs, making social media decentralized or treating SISMIs like SIFIs is a conversation for another day.
I simply propose we open our eyes to their economic and societal influence.
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