Law and New Technologies

A good start is to think about basic guidelines

by Tatiana Revoredo, ELONTech Liaison – Brazil

How can regulation be implemented in new technologies? Shall we use old rules or do we need new rules to discipline them? Who will define them? What are the risks?
Not only legislators and regulators have many questions to answer.
New technologies and their social, financial and cultural impacts require reflection and answers to complex and global issues. And this has little to do with personal talents, and more with leadership from a broad debate. It is necessary to cover all possible angles around principles and values shared by society as a whole.
For this reason, this article seeks to contribute to the expansion of this important debate concerning regulation and new technologies.
Since the beginning of the century, we have witnessed the emergence of several technologies that are allowing the emergence of new business models and services.
What’s more, emerging technologies have redesigned the way people interact and redesign the way people trust each other.
Shared Economy and the technology behind smart contracts also turn reputation into useful and manageable attributes, giving rise to the emerging Trusted Economy.
Everyone is wondering where social transformations will lead us.
In this scenario, lawmakers are stunned, not really knowing what to do and which laws to apply.
To face the seemingly endless discussions, a good start is to think of basic guidelines. That’s what we’ll try to do next.

What is the purpose of the regulation?
The law exists to guarantee a systemic stability of a country or group of countries, which means that the legislator, when creating norms, should not only look individually for this or that situation, for that or that institution or industry.
In legislating, we need to look at society as a whole, and try to reduce and assess the risks arising from the existing connections and impacts that these new technologies cause, or may cause, in ways of life, traditional corporate models, societies, and institutions at the global level .
Of course, consumer protection is very important. In addition to the need to avoid abusive behavior and the use of inside information (about our personal data, for example) or false information.
And that is where regulation comes in.
To avoid abuses, to protect citizens and consumers, to ensure the proper and efficient functioning of ecosystems around these new technologies, a minimum of regulation is necessary.
In this way, citizens, institutions and all market participants under the same type of risk should be treated equally, without discrimination.
And here, another important point must be considered: technological neutrality.

The ecosystem must be regulated, not technologies.
Technology should not be regulated (Revoredo, 2018), but some regulation is essential to protect customers, investors and set the rules of the game.
Laws that require everyone to drive on the same side of the road can speed travel and improve traffic safety, standardized weights and measures make it easier and easier to manufacture products and services, and laws that prohibit Ponzi schemes help reduce fraud and attract more market investors .
In this sense, a regulation of the surroundings of new technologies could help to maximize the benefits and to minimize the damages.
And the word “surroundings” here deserves attention, and the possibility of regulating “emerging technologies” such as blockchain, big data and IoT is quite debatable because of its dispersed and immaterial nature.
It is therefore salutary that regulation exists, but only the environment around technological innovations such as rules to protect the customer and impose penalties on those that undermine public confidence in industry, as well as the setting of guidelines for best practices by brokers, etc.
Another point that policymakers must consider is the tendency for governments to use their power to protect the interests of the “old players”, which may delay technological advancement, favoring both established actors and existing processes.

The extraterritorial nature of new technologies
Another point to consider is the fact that regulatory and legislative bodies are learning, as well as the whole society, to deal with all these emerging technologies.
We are at a time when machines learn to learn; autonomous vehicles communicate with each other and with the transport infrastructure; and smart devices respond and anticipate consumer needs.
Add to this how to deal with the extraterritorial nature of these technologies, the lack of jurisdictional linkage (for example, the ease of transferring encryption coins abroad) and the fact that they are intangible. All this makes it very difficult for any country to draft legislation without working with other governments.
Not to mention that the regulator is always the last to realize what is happening in the market, and the first to be triggered when someone needs guidance.
Also, it is worth noting that regulators and those who actually make laws have different roles.
When you talk about regulation and someone decides to settle in some sector, the regulator must take action. But it is not the regulator who legislates. Who creates the law are the legislative organs, that is to say, the parliament, and its deputies and senators. Regulators, in turn, only guide and enforce laws. But how should regulators guide and provide information on how to apply the law to this new phenomenon of emerging technologies?
There is always a relationship between innovation and risk. Regulators tend to be risk averse because they are what they seek to avoid, but it is important to emphasize that innovation must happen along with the regulator, seeking constructive solutions to the new challenges arising.
While some argue that it would be contradictory, for example, to think of cryptocurrencies regulation, given the fact that they came to counterbalance government interference in citizens’ privacy and monetary policy, it is clear that well-crafted regulation is crucial to healthy development of the cryptocurrencies ecosystem.

Consumers protection Vs Individual freedom
Regulators from many countries consider it part of their job to protect citizens and consumers from the risks of new technologies. And this is largely because they are often very cautious and many are averse to the new security vulnerabilities brought by emerging technologies.
It is worth reflecting, however, to what extent a protective stance is healthy, and in what sense the legislation on new technologies must come: putting consumer protection always ahead of individual freedom of choice? Or closely monitor the technological innovations, making it clear that abuses and damages to third parties will be held accountable?
The answer, in this case, must oscillate, since countless factors such as educational level of the population to be reached by the legislator, tradition that prevails in the country, among others, must be considered.
Here, as an example of a less protective approach and more in favor of individual freedom, we can cite the position of Swiss regulators who, in the face of a balance between consumer protection and individual freedom, adopt a stance that privileges citizens’ freedom. (The Economist, 2018) .

Shall we use old rules or do we need new rules to discipline them?
There are constant requests for changes in legislation and regulations due to the existence of emerging technologies. However, our current legal milestones are based on national boundaries.
The internet results in a fading of national borders . You can perform a legal act in another country at the press of a button on your computer. As our legal frameworks are based on national boundaries, it is initially possible to use existing legislation to regulate such situations, and it is highly relevant from the legal point of view in which country (legal) acts have been carried out.
The application of existing standards works when there is a central database and it is possible to identify a responsible party.

The Law in a decentralized world
Which law to apply when emerging technology has a decentralized nature?
For example, blockchain technology ensures that the system itself no longer needs to be tied to any legal system.
The nodes that together form a blockchain could theoretically be located in any country in the world. If the other nodes in the network refuse to accept the applicability of these rules, then the government action in question means nothing. In other words: lack of centralization and a corresponding central part mean that governments have limited scope on what happens and what does not happen in a blockchain , or under any other decentralized emerging technology.

Old players vs. new technologies
Besides new vulnerabilities brought by the innovation and high risks of emerging technologies still under construction, the speed of innovation and new business models (AirBnB, Uber, Netflix, Spotfy) are provoking a deep division.
On the one hand, the traditional actors with structure that no longer serves the social longings and the legislative framework created to maintain it.
On the other hand, new technologies, which currently drive economic growth, are causing impacts not only on business models, but also revolutionizing and provoking profound effects on the life of the human being as a whole.
Therefore, it is unwise to propose a legal proposal that seeks to regulate the new times with the uniform measures (and weight) applied to the system based on industrial society, without considering the economic-social “values” have changed.
Here, it is important to mention that actions or critiques of traditional players may delay, but not stop the social transformations resulting from innovation.
New technologies always overcome the occasional peripheral obstacles.

Humanity goes through a period of transition and significant changes in the way the world is today.

Challenging old patterns and ideas that have populated our minds for centuries, new technologies are challenging governance, business models, and centralized and controlled ways of transacting data.

Therefore, there is a need for a broad debate among citizens, governments, regulators and companies and the vision of the law from a different perspective. Although many existing legal frameworks may still be more or less applied to new technologies, the fact is that the changes will come and no one will be able to adapt this alone.