The European Union's commissioner for digital policy, Thierry Breton, warned Elon Musk that Twitter needs to improve its measures to protect users. [ABC News]

A top European Union (EU) official has warned Elon Musk that Twitter needs to beef up its measures to protect users from harmful content, to avoid violating new rules that threaten tech giants with big fines or even a ban.

Thierry Breton — the EU’s commissioner for digital policy — told the billionaire Tesla chief executive that his recently-acquired social media platform would have to significantly increase efforts to comply with the new rules, which will come into being with the Digital Services Act, which is set to take effect next year.

The two held a video call to discuss Twitter’s preparedness for the law, which will require tech companies to better police their platforms for material that, for instance, promotes terrorism, child sexual abuse, hate speech and commercial scams.

It’s part of a new digital rule book that has made Europe the global leader in the push to rein-in the power of social media companies, potentially setting up a clash with Mr Musk’s vision for a more unfettered Twitter.

US Treasury Secretary Janet Yellen said on Wednesday that an investigation into Mr Musk’s $44 billion purchase was not off the table.

Mr Breton said he was pleased to hear that Mr Musk considered the EU rules “a sensible approach to implement on a worldwide basis”.

“But let’s also be clear that there is still huge work ahead,” Mr Musk said, according to a readout of the call released by Mr Breton’s office.

“Twitter will have to implement transparent user policies, significantly reinforce content moderation and protect freedom of speech, tackle disinformation with resolve, and limit targeted advertising.”

After the self-described “free speech absolutist” bought Twitter a month ago, groups that monitor the platform for racist, anti-Semitic and other toxic speech — such the Cyber Civil Rights Initiative — reported that such language was on the rise on the social media platform.

Mr Musk has signalled an interest in rolling back many of Twitter’s previous rules that were meant to combat misinformation, most recently by abandoning enforcement of its COVID-19 misinformation policy.

He has already reinstated some high-profile accounts that had violated Twitter’s content rules and had promised a “general amnesty” restoring most suspended accounts starting this week.

Twitter didn’t respond to an email request for comment.

In a separate blog post on Wednesday, local time, the company said “human safety” was its top priority and that its trust and safety team “continues its diligent work to keep the platform safe” from hateful conduct, abusive behaviour and any violation of Twitter’s rules.

Mr Musk, however, has laid off half the company’s 7,500-person workforce, along with an untold number of contractors responsible for content moderation.

Many others have resigned, including the company’s head of trust and safety.

In the call on Wednesday, Mr Musk agreed to let the EU’s executive commission carry out a “stress test” at Twitter’s headquarters early next year to help the platform comply with the new rules ahead of schedule.

That will also help the company prepare for an “extensive independent audit” — as required by the new law — which is aimed at protecting internet users from illegal content and reducing the spread of harmful but legal material.

Violations could result in huge fines of up to 6 per cent of a company’s annual global revenue or even a ban on operating in the European Union’s single market.

Along with European regulators, Mr Musk also risks running foul of Apple and Google, which power most of the world’s smartphones.

Both have stringent policies against misinformation, hate speech and other misconduct, previously enforced by booting apps such as the social media platform Parler from their app stores and devices.

Apps must also meet certain data security, privacy and performance standards.

Mr Musk tweeted — without providing evidence this week — that Apple “threatened to withhold Twitter from its App Store, but won’t tell us why”.

Apple has not commented.

Meanwhile, Ms Yellen walked back her statements about whether Musk’s purchase of Twitter warranted government review.

“I misspoke,” she said at The New York Times’ DealBook Summit on Wednesday, referring to a CBS interview this month where she said there was “no basis” to review the Twitter purchase.

The Treasury secretary oversees the committee on foreign investment in the United States (CFIUS), an inter-agency committee that investigates the national security risks from foreign investments in American firms.

“If there are such risks, it would be appropriate for the Treasury to have a look,” Ms Yellen told The New York Times.

She declined to confirm whether CFIUS is investigating Mr Musk’s Twitter purchase.