A new framework
Taming the “Wild West” and protecting consumers.
As emerging technologies have rapidly started driving new business models in the economy, governments worldwide must develop, modify, and enforce regulations to protect consumers against unfair activities while letting innovation thrive. However, policymakers are head-scratching over the fact that emerging tech cannot be tamed by traditional regulations that are slowly crafted, enforced, and left unchanged for years. As new business models emerge, governments are challenged with creating flexible regulations at an unprecedented pace.
Stefan Berger, a German lawmaker who led the negotiation, said,
“Today we put order in the Wild West of crypto assets and set clear rules for a harmonised market. The recent fall in the value of digital currencies shows us how highly risky and speculative they are and that it is fundamental to act!”
Shortly after, Paolo Ardoino, the CTO of Tether, further added,
“MiCA is one of the more progressive initiatives and is focused on driving crypto innovation in the European region!”
Quite clearly, Blockchain is on the EU’s radar, among other technologies. According to the World Economic Forum, 10% of the global GDP will be stored on Blockchain by 2027. Adding to this number is the market size of Blockchain technology, which is predicted to hit an evaluation of $162.84 billion by 2027. The numbers indicate that Blockchain has brought technology closer to Finance, paving the way for FinTech. Therefore, it is necessary to fulfill regulatory frameworks before making further innovations.
The proposed principles to regulate emerging tech
1. Adaptive Regulation
With faster feedback loop as an immediate result, adaptive regulation relies more on trial-and-error and co-design of regulatory standards. More rapid feedback loops allow setting up policy labs and creating regulatory sandboxes to evaluate policies against defined standards and feeding inputs into revising regulations at the pace of innovation.
2. Outcome-Based Regulation
Traditional regulations are inclined towards inputs and are prescriptive. But when the regulation inclines towards outcomes, it can develop efficiencies in business operations and enable greater flexibility for innovators. Instead of defining how results can be achieved, outcome-based regulation prioritizes performance and required results.
3. Collaborative Regulation
In 2018, the International Federation of Accountants reported that regulatory patchwork had dragged the economy by $780 billion. At the rate at which the digital economy is scaling, financial authorities can benefit from Collaborative Regulation to develop and enforce concrete policy guidance and standards to outline several general principles.