On November 9th, the Federal Trade Commission (FTC) announced a settlement agreement with Zoom Video Communications, Inc. regarding the video communication platform’s privacy issues. After over a year of investigations, the FTC concluded that Zoom had misled the public about the strength of the app’s privacy protections since at least 2016. The FTC ordered, among other measures, that Zoom is prohibited from misrepresenting its privacy practices and that it must receive an independent third-party assessment of its security program every other year. This order is to stand for 20 years.

Zoom came under increased scrutiny when the COVID-19 pandemic forced huge swaths of the population to work from home and go to school online. Zoom offered a user-friendly interface that took little practice to get the hang of. On top of that, it offered free, 40-minute meetings that could host up to 100 attendants at once, making it a no-brainer for schools and businesses to give it a test run. The nine-year-old video conferencing platform saw its usership explode from 10 million users in December 2019 to 300 million by April 2020.

This increased usership did not come without its risks. The simplicity of the service led to “Zoom bombing,” where unauthorized strangers would join meetings to play pornographic videos or spew hate speech. As the FBI got involved in the matter, Zoom implemented new features to increase its privacy and security measures.

“Zoom bombing,” however, is not why the FTC started the investigation. It’s not even mentioned in the press release of the settlement.

Before Zoom was a publicly traded company, it had major security issues. For the past four years, Zoom claimed to utilize end-to-end encryption (E2EE) for its meetings, one of the most secure methods of internet communication. End-to-end encryption works by encrypting the data from a sender’s device until it reaches its intended recipient, the only device able to decrypt the message. This is why it is referred to as “end-to-end”—as only the parties on each end of the shared data are able to decrypt the messages. With end-to-end encryption, any third-party, including service providers, hackers, and even the app developers that facilitate the communications, are unable to decrypt the messages.

But this is not the type of encryption that Zoom actually provided. A spokesperson for Zoom admitted that the communications technology company, in fact, used a weaker level of security—a Transport Layer Security (TLS) encryption. This is the same type of encryption used to secure a typical HTTPS website. The key difference between this and end-to-end encryption is that Zoom could still access the video and audio of its users’ meetings. However, the FTC complaint showed that for years Zoom represented in its HIPAA Compliance Guide that it offered end-to-end encryption. Zoom videos even displayed a green icon that stated “Zoom is using an end-to-end encrypted connection” when a user dragged their mouse over it.

In July 2018, Zoom secretly installed a ZoomOpener software on Apple devices that bypassed the security protocols of Safari, Apple’s web browser. This created a one-click feature that opened the Zoom application, enabling a user’s webcam, without triggering Safari’s dialogue box that asked users if they wanted to launch a third-party app. A year later, Apple rolled out an update that removed the ZoomOpener after discovering a vulnerability that left Zoom and Mac users susceptible to an attack. The FTC alleged that this action, in conjunction with the fact that Zoom failed to notify its users of this feature, violated the FTC Act.

More recently, in the spring of 2020, a class-action lawsuit was filed against Zoom, alleging that it shared user data from its iOS app with Facebook and other third-parties. While sending user data to Facebook is far from unheard of, the concerns lie with the fact that Zoom, again, failed to notify users about what it was actually doing. Soon after the suit was filed, Zoom updated its iOS app to stop sending data to Facebook.

In October 2020, Zoom announced that it will be rolling out an update to offer end-to-end encryption (for real this time) to all of its free and paid users. But Zoom has ruffled feathers at almost every step of its nearly decade-long journey to becoming a tech giant, and with a slap on the wrist from the FTC, it’s hard to imagine that it will be abandoning its playbook of deceptive security practices anytime soon.

The Department of Justice accused Google of illegally monopolizing Internet searches in an antitrust lawsuit filed in October, alleging that its conduct was harming consumers and competitors.

The lawsuit alleged that Google, owned by Alphabet Inc, crafted deals with Internet companies like Apple to make itself the default option for users and to dominate the market share in up to 88 percent of searches. In response to these allegations, Google has contended that its actions were legal. Rather, Google argues that people use its platform because they prefer to.

According to the Wall Street Journal, Google’s partnership with Apple is at the center of the suit, and could detrimentally impact both tech companies. Although the terms of the deal between Apple and Google have never been made public, the Justice Department estimates that Google’s payments make between 15% and 20% of Apple’s annual profits. According to the lawsuit, Google pays Apple approximately $8 billion to $12 billion a year to remain the default search option on its products. In 2019, Apple devices made up almost 50 percent of its search traffic. Although it is uncertain right now how the suit will affect Apple, the company’s centrality in the case highlights a potentially sizable threat to one of Apple’s major revenue streams.

The government’s lawsuit has been over a year in the making, in the midst of the Justice Department’s broader investigation into technology companies that assume huge roles in the U.S. economy and society. Questions regarding what measures and steps should be taken to control the power of tech giants have been at the center of many policy and political concerns, especially regarding the influence tech companies have over consumers and the detrimental impact their business practices hold on new competitors. This also comes in the midst of President Trump’s promise to hold Big Tech accountable, in light of allegations against anticonservative bias on social media.

In Europe, Google has already faced various antitrust violations fines, including a $5 billion fine for unfairly favoring its own services in internet searches. In the United States, however, the case comes years after the last government antitrust suit against tech giant Microsoft in the late 1990s. The suit against Microsoft lasted over a decade and ultimately ended in Microsoft’s loss.

It seems to be the right time for the U.S. to bring this suit, although some have argued that it is overdue and even a little too late. Regardless, if prior suits have indicated anything, it is that regulated cases like these are often long, drawn out, and unpredictable. Although it may take years to pan out, it is likely that the lawsuit will have a notable and significant impact on the future of Google and big tech companies as a whole, marking the beginning to a long trial ahead.

In 2009, former Prime Minister of Malaysia, Najib Razak, formed 1 Malaysia Development Bhd, or 1MBD, a sovereign investment fund intended to boost the Malaysian economy. Facially, the fund was created to transform Kuala Lumpur into the investment hub of Southeast Asia. Prime Minister Najib’s stepson, Riza Aziz, managed the fund along with now-notorious Malaysian businessman Jho Low.

Mr. Low, a friend of Aziz with strong ties to the Saudi royal family, engaged the Southeast Asian branch of international investment firm Goldman Sachs to finance 1MBD’s operations. The branch’s chairman, Timothy Leissner, and its managing director, Roger Ng, took the lead on the deal. Together with Mr. Low, Goldman raised $6.5 billion for 1MDB through the issuance of three sets of bonds.

Despite receiving approval from such senior officials at Goldman, the loan agreements provided very little information with respect to the purpose of the funds and who would be overseeing their management, disclosures that are generally considered a prerequisite for loans of this size. In exchange for waiving such requirements, which analysts presume was in part motivated by Goldman’s intense need to rebound after the 2008 financial crisis, the firm appears to have charged 1MDB a sort of “premium” on the transaction. This premium came in the form of fees twenty times the value of those usually charged for loans of this nature, or $600 million for the bank.

It soon became clear that 1MDB was not using these loans for any legitimate public purpose, but rather to indirectly enrich, primarily, Mr. Low himself, and, secondarily, Prime Minister Najib. Between 2009 and 2013, Mr. Low diverted billions of dollars in funds allocated to 1MDB to his own personal bank accounts across the globe. Mr. Low used these stolen funds to finance a lifestyle of extreme luxury, replete with multimillion dollar yachts, real estate properties in the most expensive markets in the world, and even the financing of the renowned film “The Wolf of Wall Street,” a project which itself required an expenditure of over $100 million. Low also used his relationship with the Saudi royal family to arrange a loan of several billion dollars to a Saudi shell company, which then “donated” $700 million to Prime Minister Najib for his private use. Najib later claimed in a criminal proceeding to have had no knowledge of the donation’s origin.

In 2018, Najib was voted out of office in response to his alleged participation in this elaborate defrauding of the Malaysian people. Around the same time, regulators in fourteen countries – including the Malaysian government, Hong Kong’s markets watchdog, and the United States Department of Justice – began investigating Goldman Sachs for its involvement in brokering the bond sales that made the entire scheme possible.

These investigations have resulted in global settlements totaling roughly $6 billion against Goldman and its Southeast Asian branches and subsidiaries. In addition to various other fines, the bank recently agreed to pay $3.9 billion to Malaysia in exchange for the Malaysian government dropping all criminal charges, $2.3 billion to the U.S. Justice Department, and $600 million in disgorgement fees.

Criminal charges have also been brought individually against the bankers involved, Mr. Leissner and Mr. Ng. While Mr. Leissner pled guilty to and was indicted on charges of conspiracy to launder money and violate antibribery laws (the FCPA), Mr. Ng still awaits his trial in the U.S., has pled not guilty to charges of bribery and money-laundering, and is expected to face separate charges in Malaysian courts. Though Prime Minister Najib continuously pled his innocence throughout his own trial, he was ultimately found guilty on charges of abuse of power, breach of trust, and money laundering, and sentenced to up to twelve years in prison and $50 million in fines. Low’s fate, however, along with his whereabouts, remain unknown, making him a true “international man of mystery.”

The Department of Justice filed an antitrust lawsuit that seeks to block Visa Inc.’s $5.3 billion deal to acquire Plaid Inc. Visa agreed to buy the financial technology company in a deal designed to increase Visa’s access to the booming financial technology sector. The Justice Department argued that the acquisition would allow Visa to unlawfully maintain a monopoly in online debit services, which in turn would lead to “higher prices, less innovation and higher entry barriers for online debit services.”

Plaid is a privately held software startup that powers financial technology apps like Venmo, Acorns and Betterment by linking the financial data from people’s bank accounts to the apps.  Plaid’s technology allows “access into consumers’ various financial accounts, with consumer permission, to aggregate spending data, look up balances, and verify other personal financial information.” Accordingly, Plaid has access to financial data from over 11,000 U.S. banks. This access, the government argues, better positions Plaid to overcome entry barriers others face in attempting to provide online debit services.

The lawsuit suggests that Visa is a “monopolist in online debit transactions,” responsible for some 70% of the market for online debit services. Mastercard, Visa’s next closest rival at around one-third of the size, has not constrained Visa’s monopoly power. This leaves merchants with little choice but to accept Visa debit payments, despite complaints about the cost of Visa’s service.

Visa earns a small fee from every transaction run on its network, varying depending on the card, but debit transactions tend to be cheaper to run on Visa’s network than credit card transactions. Those transactions ultimately bring in billions of dollars in revenue for Visa every quarter.

A new service in development by Plaid would bypass traditional debit card networks, and would be a substitute for Visa’s online debit services. According to the lawsuit, this presented a competitive threat to Visa, and the proposed acquisition therefore “would eliminate a nascent competitive threat” to Visa’s monopoly.

As evidence, the Justice Department cited the CEO of Visa’s own description of the deal as an “insurance policy” to neutralize a “threat to our important US debit business.” Further, the Department cited the $5.3 billion sale price, “an unprecedented revenue multiple of over 50x” as evidence of the deal being strategic instead of financial.

Visa, on the other hand, said it “strongly disagrees” with the lawsuit, arguing that it “reflects a lack of understanding of Plaid’s business and the highly competitive payments landscape in which Visa operates.” Further, Visa argued that Plaid is not a payment network like Visa, but a payment infrastructure company. Visa said the Department of Justice’s arguments were “legally flawed,” and it “intends to defend the transaction vigorously.”

The case represents the increased scrutiny the Department of Justice plans on taking in antitrust matters in the financial sector. Specifically, the department is focused on protecting future competition, even in cases where two companies aren’t currently rivals.

The EU, through the European Commission (EC), plans to revise its legal framework for digital services by way of a new legislative package: the Digital Services Act (DSA). The announced goal of the DSA is to modernize its regulation of digital services, which has remained unchanged since its adoption in 2000. The underlying purpose is to protect strategic EU industries.

According to the Executive Vice President of the EC, Margrethe Vestager, the DSA aims to “create a more trustworthy digital world,” by holding digital services to a higher standard of transparency. The new regulations would “level the playing field” for smaller businesses, allowing entrants to the market the opportunity to grow; the DSA would prevent large online platforms from acting as gatekeepers by placing constraints on the business models of tech giants. A draft of the legislative package is expected to be available by the beginning of December.

The push for heightened regulation in the digital market has not been well-received by the major online platforms. According to Google, the proposed laws under the DSA will “curb the power of big tech.” In response to the initiative, Google allegedly plans to push back on the proposal by targeting European politicians. Google’s strategy was revealed in an internal presentation that was leaked to the French publication Le Point, and picked up by the Financial Times. The document cited an objective to “reset the political narrative” around the proposed legislation. In essence, Google hopes to weaken support for the proposal.

Though Google neither confirmed nor denied the existence of the leaked document, Google’s management has made it clear that they have concerns surrounding the proposed legislation. Amazon and Facebook have drafted complaints to the practices proposed under the DSA as well; Microsoft and Apple are also likely to be among the affected group.

Google’s leaked presentation uncovers a common response of big tech players to unfavorable regulatory proposals in the market: manipulation of public discourse and influencing lawmakers. In addition, the presentation cited strategic offensive tactics, such as highlighting the potential negative impacts of the DSA, and seeking out “allies” in its efforts to campaign against the proposal in Brussels.

Europe is not the only entity advancing new regulations of Big Tech players. The U.K. and Australia have recently recommended similar regulatory efforts. The U.S. is now seeking to catch up to its overseas counterparts: lawmakers released a proposed “massive overhaul” of U.S. legislation surrounding antitrust enforcement in the digital marketplace. There are many steps before these proposals could become law, but they are likely triggering a similar response to the one uncovered by Google’s leaked presentation.

The global pandemic that so dramatically forced the world economies to shut down, has led to a surprising number of mergers during the last quarter of 2020. This sudden influx of M&A has amounted to more than $1 trillion in transactions in sectors that might benefit from the coronavirus crisis, such as the technology sector. A high-ranking Citigroup executive, Alison Harding-Jones, urged CEOs and boards that “the way out of this crisis is through M&A” and strategic repositioning in a post-COVID era. Goldman Sachs’ head of M&A, Stephan Feldgoise, postulated that corporations are eager to explore this uncharted territory by expanding and diversifying their businesses. The accretive benefits of M&A, however, have often been argued to be circumstantial, while the legal pitfalls could be significant.

The v-shaped increase in M&A activity indicates that managers believe in the benefits of a potential acquisition. However, a study showed that a merger with no apparent synergies, driven mainly by the expansion and diversification cited by Feldgoise, would lead in consumer surplus and loss of revenue for the corporation. As such, a hedging position through M&A on horizontal or unrelated vertical products would not have a desirable effect, unless the goal is to also achieve synergistic value. On the contrary, the managers’ accretive expectation could be justified not only in absolute measures of efficiency or synergies, but also in the effective tax rate, which has been found to decrease on average by 6.7% for the acquirer. This could potentially be a strong liquidity injection for the corporation during tumultuous times. Another view suggests that rational managers might knowingly proceed in an unprofitable merger. Managers could be seeking an event-driven stock price support. As such, the M&A activity indicates that managers employ this move strategically for a variety of reasons and not just accretion or expansion and diversification.

Despite the strategic benefits that M&A pose, lawyers warn that there are legal implications that could render those benefits void. A critical step to correctly identifying a target company without encountering legal pitfalls is an in-depth due diligence process. Especially during a post-COVID era, vetting a target company to assess the transferability of liabilities should take a primary role in the acquirers’ priorities as it could substantially affect the purchase premium. Furthermore, during this time it would be salient to assess the third-party contractual consent requirements as they could act as a deterrent of a potential acquisition. This is also the case for substantial third-party business agreements, where Force Majeure clauses, during the pandemic, could lead to their dissolution and to a substantial loss of revenue for the acquirer. Moreover, in the current fast-changing environment target indemnification provisions and subsequent indemnity caps need to be very tightly drafted, as the indemnitee/acquirer is more likely to utilize these provisions. However, nowadays, the implementation of insurance schemes has substantially mitigated the risk of post-closing M&A indemnity risk.

Another, legal implication that managers need to consider is the stock to cash ratio as a means of acquisition. Acquiring companies through cash is a more straightforward process. Stock acquisitions, on the other hand, provide a portion of control to the target stakeholders, forming new board and stakeholder relationships, which need to be safeguarded for the success of the deal. Another major factor that managers should consider is the tax deferment incentives that stocks offer to target stockholders, as their tax obligations can be deferred unlike cash receivables. During a post-COVID era, acquirers seek to hoard cash as an insurance against uncertainty, leading them to seek stock offering deals. As Mr. Beck, the head of M&A of UBS said, it also means that “there is also a lower premium as target stakeholders will participate in the combined entity.” However, due to the uncertain environment, many factors need to be carefully provisioned such as whether the shares will be of fixed amount or fixed value, leading negotiating parties to follow a stricter approach clawing to their positions.

Faraday Future, the electric vehicle startup hyped as a rival to Tesla, has been eyeing a public listing through a deal with a special purpose acquisition company (SPACs). The startup’s CEO says that the company is working on a deal that will be announced: “hopefully quite soon.” Faraday’s action falls into the pool of 166 SPAC IPOs up to October 29, 2020. In fact, 2020 has been a record year for the formation of SPACs given that initial public offerings (IPOs) of SPACs have raised nearly $59.4 billion in gross proceeds, which is far higher than $13.6 billion in gross proceeds raised by SPACs in 2019 or the $10.8 billion in 2018.

SPACs originated from the development and emergence of “blank check companies” in the 1980s. Like blank check companies, SPACs are vehicles with no operating history, assets, revenue, or operations that are formed to raise capital in a public offering, will be used to acquire an existing company.

After a SPAC is established, its business model is simple: use the SPAC as a shell company to raise money from investors in an IPO, and then target and merge with a company seeking to go public. Unlike a reverse triangular merger, in which an acquiring company creates a subsidiary, merges its subsidiary into a target company, and then becomes the parent company of the target, here, the company itself is targeted by the SPAC vehicle, which will absorb it and take it public.

SPAC deals are appealing for companies that want to go public with less regulatory hurdles than a traditional flotation. For example, with a SPAC a company can announce the merger after the price and the size of the deal have been settled. In contrast, a company seeking to conduct a conventional IPO must file a detailed registration statement, respond to SEC inquiries concerning, and conform all communications to a complicated set of speech regulations (i.e., the “gun jumping rules”) before it can begin the process of pricing the IPO. Given these regulatory differences, SPAC deals are much faster and more certain than the traditional option. The Covid-19 pandemic and the resulting national shutdown have also complicated the issuers’ ability in an IPO to meet with investors for purposes of pricing a conventional IPO. SPACs offer a potential alternative.

The question now is whether a SPAC will become a mainstream option for companies that seek a public listing. While the rapid growth in these vehicles in recent years points in that direction, the potential disadvantages outweigh this conclusion.

First, the top advantage of SPACs for a company seeking to go public is its speed and certainty. However, a merger between a SPAC and a target company could fail if the SPAC’s shareholders vote against the merger. In the past, around 10% of mergers by SPACs have failed for this reason. For instance, in April 2020, TGI Fridays, a highly-recognized American brand, terminated its merger with Allegro Merger, a SPAC. According to the deal’s form 8-K file with the SEC, the reason was “extraordinary market conditions and the failure to meet necessary closing condit ions” during the COVID-19 pandemic. Another example of a SPAC that failed after the merger related to Akazoo S.A. Akazoo S.A. was the product of a September 2019 merger between a SPAC called Modern Media Acquisition Corp. (MMAC) and Akazoo. Ltd., an AI music streaming company. The merger was completed prior to the September 17, 2019 deadline for MMAC, otherwise it would have had to return all of the funds from its trust account and wind up the SPAC. However, after the merger, news came out that Akazoo Ltd. was a massive accounting fraud, making their proclaimed 5.5 million subscribers a moot point. On June 1, 2020, Nasdaq Stock Market announced that it would delist the ordinary shares and warrants of Akazoo S.A. As such, the sponsors suffered significant losses and filed a lawsuit on misrepresentation. Rencently, on September 30, 2020, the Securities and Exchange Commission (“SEC”) also filed a lawsuit against Akazoo S.A. and its original management team (not including MMAC and its directors and officers), alleging that it “grossly misrepresented the nature and success of its music streaming business.” To sum up, the uncertainty of a successful merger may come from either a SPAC or a target. Nevertheless, when the parties cannot benefit from the certainty of a successful listing, both of them will leave the market.

Second, the target company’s founders are more vulnerable to losing control of the company during a SPAC transaction than in a conventional IPO. In an IPO, the new shareholders of the company are typically individual investors and long-term institutional investors. Thus, the incumbent management typically retains a degree of autonomy. However, in a SPAC transaction, the SPAC sponsor typically expects to obtain representation on the surviving company’s board of directors, allowing the sponsor to participate in the company’s decision-making process. Therefore, a founder who intends to preserve his decision-making power may be unwilling to go public through a SPAC.

Third, a SPAC transaction causes more dilution for the company than an IPO. As we discussed above, the SPAC investors invest at greater risk than in a traditional offering. Thus, in addition to a formal discount, most SPACs compensate sponsors by giving them 20% of the entire share capital of a SPAC upon its IPO, which translates into an often-substantial ownership claim in the target following the SPAC merger. Additionally, during a SPAC’s initial public offering, investors in a SPAC are given warrants in addition to common shares, which can convert into shares of the target’s common stock following the merger, further diluting the existing shareholders of the target company.

In conclusion, SPACs are more likely a flash in the pan. This new option for companies has a long way to go before it replaces the traditional IPO, and with growth in the space, regulation will likely follow.

A decade-long legal battle between Google and Oracle reached the U.S. Supreme Court in October, 2020. This case attracts unusual interest because it could significantly impact innovation in the software industry. Two major issues in the case include whether Oracle can claim a copyright on Java APIs (Application Programming Interfaces) and whether Google’s use of the APIs constituted “fair use,” a defense for a copyright infringement claim.

When Google developed the Android operating system for mobile phones, it decided to make the platform interoperable with Java, a popular programming language in the developer community. In order to do so, Google reimplemented several Java APIs, which are interfaces that grant access to particular functions in a program. With the APIs, developers who write applications for Android can utilize the existing functions of the underlying platform and avoid having to start from scratch.

Oracle, who bought the company that owned the Java platform, sued Google for copying the Java APIs in 2010. In May 2012, Judge William Alsup of the Northern District of California ruled that APIs are not copyrightable. Distinct from patent law, the Copyright Act protects expressions but does not protect any “idea, procedure, process, system, or method of operation.” If the expressions, in this case the API codes, are too closely related to their functions so that developers have to write them in only one way to perform a particular task, they are inseparable from the task and do not quality for protection.

On one hand, re-implementing or copying APIs has been a widespread practice in the industry. Providing copyright protection to the APIs could forbid a vast number of applications that currently use the codes from operating. On the other hand, some people argue that providing copyright protection to the APIs would encourage innovation by rewarding the developers who write the codes.

In 2014, the U.S. Court of Appeals for the Federal Circuit reversed the district court’s decision. The Federal Circuit held that APIs are copyrightable and left open the possibility that Google might have a fair use defense. Google filed a petition asking the U.S. Supreme Court to review the Federal Circuit’s decision, but the Supreme Court denied certiorari. The case then went back to the district court for a trial on the fair use defense. In 2016, a jury found fair use and delivered a verdict in favor of Google. In 2018, the Federal Circuit set aside the jury’s verdict as a matter of law. In 2019, Google filed another petition asking the U.S. Supreme Court to review both decisions by the Federal Circuit. The Supreme Court granted the petition, and oral arguments were heard via telephone on October 7, 2020.

During the oral arguments, the Supreme Court justices seemed to be skeptical about Google’s argument that the codes are not subject to copyright protection but showed more sympathy with the fair use defense. Justice Roberts mentioned that “the only reason it was necessary” for Google to use the API code was that it had been “very successful” and “it seems a bit much to penalize (Oracle) for that.” Justice Neil Gorsuch pointed out that both Apple and Microsoft had created mobile operating systems without copying the Java interfaces and questioned Google’s belief that it had no choice.

According to a software developer who worked on the Java interface, if Google loses the copyright argument but wins on the fair use defense, it would be a “weak win” for the rest of the software industry because fair use turns on the merits of a particular case. The defense does not necessarily apply to other API users, but the implications of the holding on the copyright claim could be devastating. The Supreme Court has not issued its opinion yet, but this case will surely impact the software industry in the future.

The four-year trade war between the United States and China has resulted in many companies bifurcating their manufacturing and product design pipelines into one for China and another for the rest of the world. This bifurcation has been done not only to avoid costly tariffs and trade restrictions, but also out of fear of heightened security risks of doing business with China. And while these supply chain transformations may outwardly seem like a byproduct of President Trump’s nationalism, they are actually the product of a decade of increasing divergence over civil liberties and growing economic competition between the United States and China, and would likely continue in some form under a potential Biden administration.

In 2017 and 2018, the Trump administration announced a series of new tariffs on Chinese manufacturing that dramatically increased costs and barriers for trade between the two countries. The policies were designed with the aim of decreasing Western dependence on Chinese imports and increasing domestic manufacturing. These series of executive actions eventually drove Taiwanese manufacturers like Foxconn and Wistron, which manufacture consumer electronics for major US companies like Apple, to bifurcate their supply chains. They spun off parts of their businesses to manufacture products solely for the growing and lucrative Chinese market, while rapidly moving their global-oriented manufacturing plants to new sites in Southeast Asia, India, and Latin America.

However, these changes have not just been limited to supply chains. In recent years, the United States has begun to clamp down on software and telecommunications equipment of Chinese origin running on American networks. Federal officials including members of Congress have cited fears that building networks using equipment made by Chinese manufacturers like Huawei or ZTE would give Beijing an unacceptable backdoor into US internet services and pose a heightened national security risk. A key example of this was the 2019 ban on Huawei’s 5G equipment and consumer electronics in the United States. This move eventually resulted in Google severing key mobile services like Maps and Gmail from Huawei’s Android devices. The United Kingdom replicated the United States months later by opting to stop use of Huawei equipment in its nationwide 5G network.

However, while the Trump administration may have accelerated this transition, a divide between US and Chinese product and manufacturing lines was always in the cards. The United States and China have long been at odds over digital rights and trade hegemony. In the 2000s, strict Chinese censorship laws prevented Google and Facebook from entering the Chinese market and paved the way for China-specific search engines and social networks like Baidu and WeChat to run in a self-contained bubble. And China was noticeably absent from the ultimately failed negotiations on the Trans-Pacific Partnership trade agreement, whose goal from the perspective of the Obama administration was to re-center supply chains and trade rules in East Asia around the United States and its allies. Given this history of difference over civil liberties and the continued economic competition between China and the United States, it is very unlikely that a President Joe Biden would change this ongoing supply chain bifurcation.

The long overdue split between global and Chinese product chains, driven by a continued US-China impasse over digital rights and trade dominance, could continue to decrease interdependence between the two countries. Should it succeed, this bifurcation will echo for decades to come in the global economy.

Over the last twenty years one of the most notable trends in the asset management industry has been the rise of electronically traded funds (ETFs). An ETF is a fund that passively tracks a basket of securities, typically stocks or bonds. Since the first ETF tracking the S&P 500 was created in 1993, ETFs have steadily become the preferred investment instrument for millions of people and institutions seeking exposure to broad market indices. According to the research firm ETFGI, US-based ETFs have over $4 trillion in assets under management, with $326.3 billion flowing into US-listed ETFs in 2019. Within the last decade, the number of ETFs that track stock market indices has more than doubled, from 901 funds in 2010 to over 2,100 today.

Simultaneously, another less mainstream and risky trend has shaken up retail investing: the rise of digital currencies. Bitcoin, a blockchain-based peer-to-peer cryptocurrency pseudonymously invented in 2008, remains the most popular and widely held digital currency. Often referred to as “digital gold” due to its limited supply and ability to function as a hedge against inflation (like gold ETFs), Bitcoin now has a market capitalization of nearly $200 billion. According to a survey by Blockchain Capital, 30 % of those in the 18-to-34 age range would rather own $1,000 worth of Bitcoin than $1,000 of stocks or bonds. As interest has grown, established financial institutions have taken notice. Just last week, PayPal announced that it would allow US users to buy, hold, and sell cryptocurrencies. In the company’s press release PayPal CEO Dan Schulman said that the shift to digital currencies “is inevitable.”

These two trends – ETFs and cryptocurrencies – are now set to collide. At a conference held by the Chamber of Digital Commerce on October 2^nd, Securities and Exchange Commission (SEC) Chairman Jay Clayton stated that the SEC is actively developing a regulatory framework that will permit ETFs that track crypto assets. The SEC is collaborating with the Office of the Comptroller of the Currency (OCC) and the Commodity Futures Trading Commission (CFTC) on an approach to oversee cryptocurrencies, which continue to exist in a regulatory grey area. Clayton’s comments came as a response to specific interest in the prospect of cryptocurrency ETFs. A recent study by Bitwise Asset Management found that 76% of surveyed financial advisors reported that they had received a question from a client about crypto in the past twelve months. In addition, a top concern of financial advisors in the survey was that cryptocurrencies lack “easily accessible investment vehicles like ETFs or mutual funds.”

While Clayton’s statement indicates that a cryptocurrency ETF could be on the horizon, proponents shouldn’t get their hopes up just yet. Historically, the SEC has been skeptical of cryptocurrencies and reluctant to grant regulatory approval to experimental ETFs. In 2018 the SEC rejected the Winklevoss Bitcoin Trust, a bitcoin ETF launched by Cameron and Tyler Winklevoss (the twins made famous for their early involvement with Facebook and subsequent depiction in The Social Network film). The SEC cited issues related to fraud and investor protection. Last March, the SEC similarly rejected Wilshire Phoenix’s proposal for a bitcoin-based ETF.

The appeal of a digital currency ETF – for both ETF issuers and retail investors – is that it would allow new investors to gain exposure to a diversified basket of cryptocurrencies. Further, crypto ETFs could offer outsized returns that are uncorrelated with the stock market. According to a recent paper by Sandip Mukherji of Howard University, over the last 60 months Bitcoin has provided higher returns (with higher volatility) than ETFs containing bonds, stocks, commodities, and other alternative assets.

Though still years away, an SEC-approved ETF tracking digital assets would accelerate capital flowing into ETFs as well as the adoption of digital currencies. As regulators better understand the cryptocurrency ecosystem and interest from investors continues to climb, a crypto ETF could happen sooner rather than later.