March 23, 2023 - TikTok CEO Shou Chew testifies before Congress

House Speaker Kevin McCarthy said Wednesday he supports legislation that would effectively ban TikTok in the United States, the clearest sign yet of the growing momentum on Capitol Hill to outlaw the popular social media app. 

“I don't know that we have to give the president the authority. I think maybe we may be able to do it ourselves and I'll let it work in the House,” he told CNN’s Manu Raju. 

Asked if he would support a congressional ban on the app, McCarthy responded; “Yes.”

“I think you see a bipartisan concern here with what's happening on TikTok especially what's happening to the data for Americans … there's many different ramifications here so I think they could come together. I'd let the committees do their work and see if the product comes out when it gets done,” McCarthy said of potential legislation, and did not give any timeline. 

TikTok CEO Shou Chew addressed reports that TikTok uses keylogging, a method by which an app or program monitors the keyboard entries of users.

"We do not engage in keystroke logging to monitor what users say," Chew said. "It's to identify bots. It's for security purposes, and this is a standard industry practice."

Privacy experts have confirmed that keylogging is indeed widespread among websites and that the technique is not inherently malicious, but can potentially lead to user data being collected when users type in sensitive personal information into websites they visit.

The fact that keylogging is a common industry practice does not necessarily excuse TikTok, but it highlights privacy advocates' broad concerns about the use of keylogging more generally and underscores calls for stronger privacy laws for all companies.

The House Committee for Energy and Commerce, where TikTok CEO Shou Chew is testifying, is now in recess.

Even before his first Congressional appearance was over, at least one industry watcher was quick to pan the TikTok CEO's performance as a failure.

"We would characterize today's testimony by TikTok CEO Shou Zi Chew in the Beltway as a 'disaster' moment," Dan Ives, an analyst at Wedbush, wrote in a note Thursday as the hearing was still underway.

Ives said Chew's performance "will likely catalyze more calls by lawmakers and the White House to look to ban TikTok within the US if the company does not look to spin-off and force a sale from Chinese parent ByteDance."

Chew faced intense skepticism from lawmakers about his company's efforts to wall off US user data and address Washington's concerns about TikTok's ties to China.

"Chew walked a tight rope in answering the questions with a lot more uncertainty around the walled off data and comfort that China does not have access to TikTok's 150 million US consumers data," Ive said. "In our opinion, the odds were stacked against Chew heading into today."

A multi-agency government panel on Thursday vowed to clamp down on data security risks stemming from foreign-linked business activity, as TikTok's CEO sought to stave off a nationwide ban during a three-hour-long congressional hearing.

The Committee on Foreign Investment in the United States, which is charged with reviewing foreign investment deals for national security implications, did not address or name TikTok specifically.

But in a statement, the Treasury Department — the US agency that chairs CFIUS — warned that it "will not clear any transaction unless it determines there are no unresolved national security concerns."

"Broadly speaking, some transactions can present data security risks — including providing a foreign person or government with access to troves of Americans’ sensitive personal data as well as access to intellectual property, source code, or other potentially sensitive information," a Department spokesperson said. "CFIUS, on a case-by-case basis, will ensure the protection of national security, including to prevent the misuse of data through espionage, tracking, and other means that threaten national security."

For more than two years, CFIUS and TikTok have been negotiating on a possible deal that might address US security concerns and allow the app to continue operating in the United States.

That lengthy process has prompted lawmakers to pressure the Biden administration to hurry up, and some have introduced legislation to ban TikTok. Since then, CFIUS has threatened TikTok with a ban unless the company's Chinese owners sell their shares in the company.

TikTok CEO Shou Chew said that what US officials fear — Chinese government access to TikTok's user data — is a hypothetical scenario that has not been proven.

"How can all of the countries [that have banned TikTok on government devices] and our own FBI director have been wrong?" asked Rep. Debbie Lesko.

"I think a lot of risks that are pointed out are hypothetical and theoretical risks," Chew said. "I have not seen any evidence. I am eagerly awaiting discussions where we can talk about evidence and then we can address the concerns that are being raised."

US Secretary of State Antony Blinken on Thursday said TikTok should be “ended one way or another,” but noted “there are different ways of doing that.”

Speaking at a House Foreign Affairs Committee hearing, Blinken said he did not know if it would be sufficient for TikTok to be divested from its Chinese parent company.

The top US diplomat said he believed the app is a threat to US national security, but would not outright say that it should be banned. He noted that it has been prohibited for use by US Embassy contractors and third party vendors.

“Clearly, we, the administration and others are seized with the challenge that it poses and are taking action to address it,” he said.

When asked about election misinformation, TikTok CEO Shou Chew stressed that the platform takes the issue seriously, and highlighted that the app does not do political ads.

"We are the only platform that I know of that doesn't actually take political ads. We don't accept money. I don't think other platforms can say that," he told Democratic Rep. Marc Veasey, the co-chair of the Congressional Voting Rights Caucus.

Veasey had expressed concerns about China using the power of TikTok's reach around the world "to influence public opinion and undermine the integrity of our democratic elections."

However, when he cited reports saying that TikTok approved 90% of the false political ads targeted at young US voters that researchers tested on the platform, Chew said he would need to review the report given TikTok's policy on election misinformation and political ads.

"We do take dangerous misinformation, particularly around an election, very seriously," Chew added.

A TikTok ban is far from a certainty despite bipartisan bluster at today's hearing. But if it were to be banned, Snapchat could be the biggest beneficiary.

Moody's analyst Emile El Nems said in a note to investors Thursday that YouTube, Instagram and Snap would benefit from a TikTok ban, each gaining a higher share of the advertising market.

But Snap would be the biggest winner.

"Given the revenue scale of YouTube and Instagram, the TikTok ban creates a smaller revenue opportunity, but it could be materially positive for Snap," said El Nems.

Snap's stock surged earlier this month after Congress renewed efforts to ban TikTok. Shares of Snap were up 4% in trading Thursday as the hearing got underway.