Anticipatory regulation is an emerging method of regulation that is proactive, iterative and responds to evolving markets
It is important since traditional ways of creating regulation are increasingly struggling to cope with the pace of change in technology. We’re exploring its potential, and how to make it work in practice.
Anticipatory regulation as an innovation method
Anticipatory regulation is an emerging method of regulation that is proactive, iterative and responds to evolving markets. These characteristics distinguish it from other more reactive forms of regulation.
Traditional ways of creating regulation are increasingly struggling to cope with the pace of change in technology. Fast moving innovation in technologies like drones, blockchain or artificial intelligence (AI) bring big opportunities, but also carry risks for society. At the same time, more mature regulated markets, such as finance and energy, are not delivering the competition and innovation that customers and the economy needs.
Nesta’s research has pioneered a new way of thinking about regulation and is working to show what it means in practice. In our work, we consider the impact this approach could have on the UK’s global competitiveness and explore how it could be used to capture the benefits of emerging tech for the public good.
As an innovation method, the central goal of anticipatory regulation is that it enables and supports innovation around new technologies or business models in a ‘responsible’ and more inclusive way.
Our work on anticipatory regulation
Nesta’s research team has long analysed the many ways in which new policy tools are being used around the world.
We have analysed how regulatory sandboxes - where regulators work closely with businesses to test out and bring products quickly, but safely, to the marketplace - are used globally. From this work, we know that governments are increasingly creating testbeds like this for new technologies - with a particular focus on developments like the Internet of Things or driverless cars.
Last year, for example, our policy engagement and working paper ‘A working model for anticipatory regulation’ influenced the announcement of a new Regulatory Pioneers Fund (£10m) in the UK government’s Industrial Strategy. This initiative aims to fund UK regulators to test and scale innovative methods when dealing with emerging technologies.
Over the next few years, Nesta plans to deepen its pioneering work in the field of anticipatory regulation by helping governments to raise the game for their regulators. We will use practical experiments to demonstrate how this method can help ensure that societies and economies reap the best from emerging technologies and better involve the public in shaping and guiding policy.
Our work will include projects, events and research publications. Collectively, this will build on our legacy of research in this area.
In 2016, we set out detailed plans for regulating AI in order to ensure this technology is used to its full potential, but in an ethical way. This included calling for a new Machine Intelligence Commission for the UK and a code of standards to guide public agencies.
Later in 2017, Nesta initiated a challenge prize - The Open Up Challenge - as part of a wider package of new reforms driven by government and the Competition and Markets Authority. This £5 million prize is designed to inspire the creation of apps and tools that use ‘open data’ to help small businesses compete in the digital economy. In the same year, Nesta joined the DECODE project, a major European Commission Horizon 2020 initiative with 14 partners, tasked with create tools that give people ownership of their personal data.
Through its States of Change programme, Nesta also works with dozens of governments worldwide that are now applying innovation methods to regulation, including the UAE, Canada and Portugal. Through the The Flying High Challenge Prize, Nesta is also bringing together city leaders, businesses and citizens to work together to shape regulation and decide how best to use drone technology in city environments for social good.
As part of our ongoing work, Nesta continues to work with the World Economic Forum, which is creating a Center for the Fourth Industrial Revolution that’s drawing on our thinking and will link up some of the governments trying out new approaches.
Anticipatory Regulations Supports AutoTech, FinTech Start-Ups, September 2017
The field is moving fast and case studies are still emerging. Finland has attracted substantial investment from Rolls Royce for an autonomous shipping R&D testbed. Equally, the US state of California has awarded 47 localised trial permits to companies to test driverless vehicles on its roads.
The central bank in Singapore, the Monetary Authority of Singapore (MAS), has also temporarily relaxed regulations for a duration to allow for experimentation by FinTechs. And, under the RegLab framework in Bahrain, FinTech participants enjoy a two-year period to develop, test and launch their products and services in a controlled environment.