• Emerging technologies will have a vital role in the recovery from the pandemic and avoiding future crises.
  • But regulation is not keeping pace with innovation in fast-moving areas such as fintech and facial recognition.
  • Collaborative and innovative regulation can help close this gap, the World Economic Forum’s Global Technology Governance Report 2021 says.
  • Japan’s collaboration with the cryptocurrency industry and Finland’s open-data approach to transport show how governance can stimulate innovation and increase public trust.

From robots that minimize human contact to data analytics that can predict infection risks, technology has saved lives and livelihoods during the pandemic.

But as the Fourth Industrial Revolution (4IR) gains pace, are we also prepared for the challenges? The pandemic has seen a surge of phishing attacks as cybercriminals prey on our increased digital dependence.

From artificial intelligence (AI) to blockchain and drones, the coming wave of innovations could help build a fairer society – but without the right governance, these new technologies could pose risks too.

To stimulate this debate, the Forum has partnered with Deloitte to produce the Global Technology Governance Report 2021 – a survey of the most pressing gaps in technology governance and how to solve them.

This chart shows the governance gaps in technology.
The growing power of technology poses a number of concerns.
Image: Deloitte analysis/World Economic Forum

What’s the problem?

Take cryptocurrencies: they could be gamechanger for financial services. But estimates suggest that Bitcoin now accounts for more than 90% of ransomware payments. This illustrates what can happen when a promising technology expands with inadequate scrutiny.

Misuse and abuse of technologies can thrive in conditions including insufficient regulation, inconsistencies in the treatment of data across jurisdictions, and shortcomings in privacy and accountability.

So how can the global community address the technology governance deficit? Here are six ways we can make a start.

1. Ethical governance

In recent months, a backlash has grown against facial recognition software after it developed faster than regulators could address privacy concerns. This illustrates how tackling ethical issues has a crucial role in maximizing the benefits of technology.

With this in mind, the UK government has set up a facial recognition working group, examining issues including the use of real-time facial recognition for policing. In time, it’s hoped the move will yield benefits for both public and private stakeholders.

Stronger technology governance can help boost the fourth industrial revolution.
Strong, agile, governance can help realize the benefits of the Fourth Industrial Revolution.
Image: Deloitte analysis/World Economic Forum

2. Public-private coordination

Cryptocurrencies have become a popular way to move illegal money, in part because they lack regulatory scrutiny. In response, Japan’s financial regulator, the Financial Services Agency (FSA), is co-creating regulation with the private cryptocurrency sector.

The result is a set of rules that protect the public while encouraging companies to take more responsibility. For example, the FSA has granted Japan’s cryptocurrency industry official status to self-regulate and police domestic exchanges. In return, it is required to release data on measures including trading volumes and currency values.

3. Agile, responsive regulation

Too often, there is a mismatch between the cadence of governance and innovation. Regulations can take years to develop, but 4IR technologies often emerge from agile sprints.

The approach taken by the US National Highway Traffic Safety Administration (NHTSA) to the development of autonomous vehicles shows how these twin tracks can be better synchronized. In 2016, the NHTSA issued its guidelines for the emerging technology. Since then, as AV technology has evolved, it has revised and iterated its guidelines four times based on feedback from industry partners.

4. Experimental: sandboxes and accelerators

“Over the heads of people, beyond the line of sight and at night.” That’s how unmanned aerial systems were tested in the US – despite these conditions being forbidden at the time. The method was a regulatory “sandbox” – a closed, safe environment where proofs of concept can be tested while regulators watch.

Done right, sandboxes can accelerate innovation and generate real-time governance lessons. In the US, 10 public-private partnerships came together to use the unmanned aerial systems sandbox, accelerating the pace of drone innovation – safely.

5. Data sharing/interoperability

In Finland, commuters in cities such as Helsinki can plan, book and pay for trips across multiple transport modes using a single app called Whim. This innovation was unlocked by a revision to the country’s Transport Code. It required public transport operators to make key data, such as timetables, routes and ticket prices, available via open application programming interfaces (APIs).

Given that 4IR technologies can produce vast amounts of data, if it can be pooled and made available there are greater opportunities to leverage its benefits for everyone.

"A data-driven economy is needed now more than ever. The full value of data is essential to driving an economic rebound in the wake of Covid-19. People across the world, along with governments, civil society and the private sector want to use data for public good."

—Alice Gast, President, Imperial College London

6. Regulatory collaboration

It’s not enough for a country’s regulators to work with its technology entrepreneurs: regulators also need to work with each other. There are already encouraging templates for how this can work well.

The United Nations’ Economic Commission for Europe has facilitated a forum in which China, the EU, Japan and the US have come together to help harmonize autonomous vehicle regulations.

The result is a set of binding rules that more than 50 countries have now signed up to, creating a more productive environment for innovation.