Economic Archives | Digital Watch Observatory

Deepfakes scandal puts Elon Musk and X under scrutiny in France

French prosecutors have escalated concerns about deepfakes linked to Elon Musk’s platform X, alerting US authorities to suspicions that manipulated content may have been used to influence the company’s valuation.

According to the Paris prosecutor’s office, the controversy surrounding sexually explicit deepfakes generated by Grok, X’s AI tool, may have been deliberately amplified to artificially boost the value of X and its associated AI entity ahead of a planned stock market listing in June 2026.

Authorities in France confirmed they had contacted the US Department of Justice and legal representatives at the Securities and Exchange Commission to share findings related to the deepfakes investigation and potential financial implications.

The case builds on an ongoing French probe into X, which initially focused on alleged algorithmic interference in domestic politics. Investigations have since expanded to include the spread of Holocaust denial content and the dissemination of sexualised deepfakes through Grok.

French regulators have taken additional steps, including summoning Musk for a voluntary interview and conducting searches at X’s local offices, actions he has described as politically motivated. Parallel investigations have also been launched in the UK and across the European Union into the use of AI tools to generate harmful deepfakes involving women and minors.

Would you like to learn more about AI, tech, and digital diplomacy? If so, ask our Diplo chatbot!

Social media ban in Ecuador targets youth crime recruitment

A proposal to restrict minors’ online activity is gaining momentum in Ecuador, where lawmakers are considering a social media ban for children under 15 as part of a broader response to rising organised crime.

Under discussion in the National Assembly, the initiative introduced by Assembly member Katherine Pacheco Machuca would amend the Code of Childhood and Adolescence to block access to platforms enabling public interaction, content sharing, and messaging. The proposal defines social networks broadly, covering services that allow users to create accounts, connect with others, and exchange content.

Unlike similar debates elsewhere, the justification for the social media ban is rooted less in mental health or privacy concerns and more in security. Ecuador has experienced a sharp deterioration in public safety, with rising homicide rates, expanding criminal networks, and increasing pressure on state institutions.

Recent findings from Ecuador’s Organised Crime Observatory indicate that around 27% of minors approached by criminal groups report initial contact through social media platforms. Surveys conducted by ChildFund Ecuador further suggest that vulnerable adolescents are increasingly exposed to recruitment tactics that combine economic incentives with normalised portrayals of violence.

In that context, the proposed social media ban is framed as a preventative measure against criminal recruitment rather than solely a child protection tool. The initiative forms part of a wider regulatory shift, including new cybersecurity legislation and draft laws targeting recruitment practices conducted through digital channels.

Would you like to learn more about AI, tech, and digital diplomacy? If so, ask our Diplo chatbot!

Europe boosts AI, talent and investment to compete with US and China

Efforts to strengthen technological competitiveness in Europe focus on advancing AI capabilities, developing new forms of talent and improving access to investment.

Discussions at the CTx Tech Experience in Seville highlighted a growing consensus that innovation must scale more effectively if the region is to compete globally.

Participants emphasised that Europe continues to face structural challenges, including fragmented markets, regulatory complexity and limited capital for high-growth companies.

These constraints have made it more difficult for startups to expand, prompting calls for stronger coordination between public institutions and private investors.

AI is increasingly viewed as the foundation of the transformation. Industry leaders pointed to the emergence of new business opportunities driven by AI, alongside the need to translate innovation into scalable commercial outcomes.

At the same time, labour market dynamics are shifting towards hybrid skillsets that combine technical expertise with business understanding and critical thinking.

In such a context, strengthening Europe’s innovation capacity is seen as essential to competing with global powers such as the US and China.

As technological competition intensifies, the ability to align talent, capital and policy frameworks will play a decisive role in shaping the region’s position within the global digital economy.

Would you like to learn more about AI, tech and digital diplomacy? If so, ask our Diplo chatbot!

US releases national AI policy framework

The Trump Administration unveiled a national AI framework to boost competitiveness, security, and benefits for Americans. The plan seeks to ensure that AI innovation supports all citizens while maintaining public trust in the technology.

Six key objectives form the foundation of the policy. These include protecting children online, empowering parents with tools to manage digital safety, strengthening communities and small businesses, respecting intellectual property, defending free speech, and fostering innovation.

The framework also prioritises workforce development to prepare Americans for AI-driven job opportunities.

Federal uniformity is considered critical to the plan’s success. The Administration warns that a patchwork of state regulations could stifle innovation and reduce the United States’ ability to lead globally.

Congress is encouraged to collaborate closely to implement the framework nationwide.

The Administration emphasises that the United States must lead the AI race, ensuring the benefits of AI reach all Americans while addressing challenges such as privacy, security, and equitable access to opportunities.

Would you like to learn more about AI, tech and digital diplomacy? If so, ask our Diplo chatbot!

Deepfake abuse crisis escalates worldwide

AI-generated deepfake abuse is emerging as a serious global threat, with women and girls disproportionately affected by non-consensual and harmful digital content. Advances in AI make it easy to create manipulated content that can spread across platforms within minutes and reach millions.

Data highlights the scale of the issue. The vast majority of deepfake content online consists of explicit material, overwhelmingly targeting women.

Accessible and often free tools have lowered the barrier to entry, enabling widespread misuse. At the same time, the ability to endlessly replicate and share such content makes removal nearly impossible once it is published.

Legal responses remain fragmented, with many pre-existing laws leaving gaps in addressing AI-generated deepfake abuse. Enforcement issues, such as cross-border challenges and limited digital forensics capabilities, make it unlikely that perpetrators will face consequences.

Pressure is mounting on governments and technology platforms to act. Calls for reform include clearer legislation, faster obligations to remove content, improved law enforcement capabilities, and stronger support systems for victims.

Without coordinated global action, deepfake abuse is set to expand alongside the technologies enabling it.

Would you like to learn more about AI, tech and digital diplomacy? If so, ask our Diplo chatbot!

Crypto tax reform in Brazil pushed to 2027

Brazil has postponed discussions on its upcoming cryptocurrency tax framework until after the October 2026 presidential elections, signalling a cautious political approach to digital asset regulation.

Finance officials aim to avoid introducing contentious fiscal measures during an election cycle, despite earlier plans to launch a public consultation later this year.

Recent tax reforms have already marked a significant shift in Brazil’s crypto policy. A flat 17.5% tax on capital gains was introduced in June 2025, replacing earlier exemptions for smaller transactions.

Previous rules allowed tax-free monthly sales up to 35,000 Brazilian real, while higher volumes were subject to progressive rates. Banco Central do Brasil classified stablecoin transfers as foreign exchange, making them subject to standard currency tax rules.

Authorities are considering broader crypto taxes, including on assets used for international payments. Alignment with the Crypto-Asset Reporting Framework also remains on the agenda, indicating a move towards tighter oversight and global regulatory coordination.

Strong adoption highlights the policy’s importance, with Brazil leading Latin America and ranking among the world’s top crypto markets. Regional data shows a surge in adoption, strengthening Brazil’s role in the global digital asset market.

Would you like to learn more about AI, tech and digital diplomacy? If so, ask our Diplo chatbot!

EU lawmakers call for faster enforcement of digital competition rules

Members of the European Parliament are calling for more rapid progress in implementing the bloc’s digital competition framework, with particular focus on the Digital Markets Act.

In a recent resolution, lawmakers urged the European Commission to ensure timely and effective enforcement of the rules designed to regulate large online platforms. The legislation aims to address concerns around market dominance and promote fair competition across the digital economy.

The discussions reflect ongoing concerns that delays in enforcement could undermine the framework’s effectiveness, particularly as major technology companies continue to expand their influence. Platforms such as Google, Apple and Meta are among those expected to comply with the new obligations.

At the same time, policymakers are balancing regulatory oversight with the need to maintain innovation and competitiveness. The debate forms part of a broader effort in the EU to strengthen digital governance and reinforce the region’s position in global technology markets.

Would you like to learn more about AI, tech and digital diplomacy? If so, ask our Diplo chatbot!

Telefónica Tech moves to combine AI and quantum computing

Telefónica Tech has partnered with three European firms to bring AI and quantum computing closer together. The collaboration aims to improve how advanced models are developed and deployed across different environments.

The initiative brings together Qilimanjaro Quantum Tech, Multiverse Computing and Qcentroid. Their combined expertise is expected to support more efficient, compact and locally deployable AI systems.

Quantum computing is seen as a way to reduce the heavy processing demands of large AI models. Faster computation could yield more accurate results while reducing the time required to solve complex problems.

Each partner contributes specialised capabilities, from quantum hardware and algorithms to software platforms and orchestration tools. These technologies could support applications such as simulations, edge AI and rapid prototyping.

Telefónica Tech is also strengthening its role in integrating AI and quantum solutions for enterprise clients. The move reflects a broader push to build scalable, sovereign and next-generation digital infrastructure in Europe.

Would you like to learn more about AI, tech and digital diplomacy? If so, ask our Diplo chatbot!

AI-generated songs used in $10 million streaming fraud

A large-scale fraud scheme using AI-generated music has exposed vulnerabilities in streaming platforms and royalty systems. Billions of fake streams were used to divert payments away from legitimate artists and rights holders.

The scheme ran from 2017 to 2024 and involved uploading hundreds of thousands of AI-generated tracks. Automated programs were then used to stream the songs at scale, inflating play counts and generating revenue.

The operation relied on thousands of bot accounts, bulk email registrations and cloud-based systems. Streaming activity was spread across many tracks to reduce detection and maintain consistent earnings over time.

Michael Smith, a 54-year-old from North Carolina, has pleaded guilty to conspiracy to commit wire fraud in federal court. Prosecutors say he obtained more than $10 million and agreed to forfeit over $8 million in proceeds.

Authorities say the case highlights how AI and automation can be used to manipulate digital platforms. The court will determine the final sentence as concerns grow over similar schemes.

Would you like to learn more about AI, tech and digital diplomacy? If so, ask our Diplo chatbot!

Human data demand fuels new global digital economy

A growing number of individuals worldwide are participating in a new digital economy built around supplying data for AI systems.

Through platforms such as Kled AI and Silencio, users upload videos, audio recordings and personal interactions in exchange for payment, contributing to the development of increasingly sophisticated AI models.

Such a trend reflects a broader shift in the AI industry, where demand for high-quality human-generated data is rising as traditional web-based sources become more limited.

Researchers suggest that human data remains essential for improving system performance and modelling behaviour beyond existing datasets. As a result, data marketplaces have emerged as an alternative supply mechanism.

Economic considerations often shape participation. In regions facing limited employment opportunities or currency instability, earning income in global currencies can provide a meaningful financial incentive.

At the same time, similar practices are expanding in higher-income countries, where individuals seek supplementary income streams amid rising living costs.

However, the model introduces complex trade-offs.

Contributors may grant extensive usage rights over their data, sometimes on a long-term or irreversible basis. Experts note that such arrangements can reduce control over how personal information is reused, including in contexts not initially anticipated.

Concerns also extend to issues such as data security, transparency and the potential for misuse in areas including synthetic media and identity replication.

Would you like to learn more about AI, tech and digital diplomacy? If so, ask our Diplo chatbot!