The Future of Regulation
Principles for regulating emerging technologies
Authors: William D. Eggers, Mike Turley , Pankaj Kishnani
SWEEPING technological advancements are creating a sea change in today’s regulatory environment, posing significant challenges for regulators who strive to maintain a balance between fostering innovation, protecting consumers, and addressing the potential unintended consequences of disruption.
Emerging technologies such as artificial intelligence (AI), machine learning, big data analytics, distributed ledger technology, and the Internet of Things (IoT) are creating new ways for consumers to interact—and disrupting traditional business models. It’s an era in which machines teach themselves to learn; autonomous vehicles communicate with one other and the transportation infrastructure; and smart devices respond to and anticipate consumer needs.
In the wake of these developments, regulatory leaders are faced with a key challenge: how to best protect citizens, ensure fair markets, and enforce regulations, while allowing these new technologies and businesses to flourish?
The assumption that regulations can be crafted slowly and deliberately, and then remain in place, unchanged, for long periods of time, has been upended in today’s environment. As new business models and services emerge, such as ridesharing services and initial coin offerings, government agencies are challenged with creating or modifying regulations, enforcing them, and communicating them to the public at a previously undreamed-of pace. And they must do this while working within legacy frameworks and attempting to foster innovation.
As seen from the history of early automobile regulation (see “A history lesson” sidebar), tough restrictions on motor vehicles—laws designed to protect pedestrians, horse-drawn carriages and even cattle—delayed advances in automobile development by decades. Today, regulators face similar challenges. They must balance their charge to protect citizens with advancing innovation in new technologies and businesses, resisting the urge to overregulate.
This paper begins by exploring the unique regulatory challenges posed by digital-age technologies and business models. Section two describes the four critical questions policymakers and regulators must address when it comes to regulating the digital economy. Finally, section three provides a set of five principles to guide the future of regulation:
- Adaptive regulation. Shift from “regulate and forget” to a responsive, iterative approach.
- Regulatory sandboxes. Prototype and test new approaches by creating sandboxes and accelerators.
- Outcome-based regulation. Focus on results and performance rather than form.
- Risk-weighted regulation. Move from one-size-fits-all regulation to a data-driven, segmented approach.
- Collaborative regulation. Align regulation nationally and internationally by engaging a broader set of players across the ecosystem.