How global players are balancing innovation with tech regulation

William Fry’s Leo Moore takes a closer look at the trends in tech regulation and how the EU, UK and US are walking the tightrope.

Technology is increasingly shaping the future of business, global economies and societies. But the approach to technology regulation, such as in the EU, the UK, and the US varies, sometimes significantly.

A jurisdiction’s approach to regulation reflects its own values, unique priorities and challenges meaning that tech companies operating in a global world are facing significant challenges.

Despite this, such obstacles can be developed into a competitive advantage, ensuring sustainable growth and innovation in a complex global market.

The EU – a regulatory leader

The EU is committed to fostering innovation.  It believes that “digital solutions that put people first will open up new opportunities for businesses, encourage the development of trustworthy technology, foster an open and democratic society, enable a vibrant and sustainable economy, help fight climate change and achieve the green transition”.

The European Innovation Council (EIC), the EU’s flagship innovation think tank programme, has identified 34 emerging technologies that could shape the future of European competitiveness including in areas such as green technologies, healthcare innovations and digital transformation.

While striving for new technologies and innovation, the EU has also been at the forefront of the development of emerging technology regulation. The EU’s digital strategy is an ambitious and far-reaching project to regulate the digital economy, impacting businesses operating in or into Europe.

This suite of EU regulations on key areas such as non-personal data, content, technology platforms, cybersecurity and AI represents a seismic shift, which is inevitably going to have a profound impact on the use of technology by businesses and consumers.

The EU AI Act aims to ensure safe, ethical and responsible use of artificial intelligence in the EU. With AI technologies advancing rapidly, the risks of misuse or malfunction increase. Since August 2024, the Act has turned AI governance into legal obligations and enforcement, providing guidelines and accountability measures to protect citizens’ rights, promote transparency and build trust in AI systems.

As innovative technologies emerge, so too do the risks of cybercrime from nefarious third-party and state actors. The EU has initiated a comprehensive suite of legislation aimed at boosting cybersecurity of network and information systems (NIS) to safeguard vital services for the EU’s economy and society.

NIS2, DORA and the Cyber Resilience Act are all familiar terms in the corporate board room as businesses grapple with obligations to protect their tech stacks and data from loss and unauthorised access.

The Digital Services Act (DSA) is another prime example of the EU’s approach to technology regulation. The DSA aims to create a safer and more accountable online environment by regulating online intermediaries and platforms such as marketplaces, social networks and content-sharing platforms. Its main goals are to prevent illegal and harmful activities online, protect fundamental rights and create a fair and open online platform environment.

And on goes the trend – Data Act, Data Governance Act, GDPR, ePrivacy, Health Data Spaces, European Accessibility Act; the EU is not short on regulations.

UK straddling innovation and regulation

Despite its departure from the EU, the UK continues to strengthen its science and technology ties with the EU. The UK’s participation in Horizon Europe and other European research initiatives highlights its commitment to maintaining strong collaborative relationships with the EU. This collaboration is crucial for driving innovation and ensuring that the UK remains competitive in the global technology landscape.

Despite being outside the EU tent, UK businesses still find themselves subject to much regulation. Not only is the UK regulating tech companies from within, such as by way of the Digital Markets, Competition and Consumers Act, proposed AI regulations and updated cybersecurity/NIS laws, but UK businesses operating in or into the EU must also comply with a suite of EU tech and digital regulations in order to be permitted do business in the EU.

US – market driven, less regulation

In contrast, the US has adopted a more laissez-faire approach to technology regulation. The election of president Donald Trump marked a significant shift in the US’s approach to technology regulation. Trump’s policies included rescinding previous executive orders on AI and digital assets, marking a shift towards a less regulated environment for technology companies.

In the absence of federal regulation, AI regulation in the US is fragmented, with state-level initiatives leading the way. Trump’s approach prioritises private sector gains and rapid innovation over strict regulations, which can help companies move fast but arguably lacks adequate safeguards. This shift has had a profound impact on the technology sector, influencing everything from the value of cryptocurrencies to trade policies and to immigration laws.

The US is known for its high levels of digital adoption and use, with widespread internet penetration, social media usage and mobile device use/ownership. This environment has fostered the growth of key emerging technologies, such as AI, quantum computing and blockchain.

One of the most significant aspects of the US’s legal and regulatory approach is its emphasis on First Amendment rights to free speech. This constitutional protection has a direct impact on technology regulation, particularly in areas like content moderation and data privacy.

The US’s focus on limiting government attempts to control the editorial decisions of social media companies, and thus protecting free speech, runs contrary to the EU’s approach, which includes regulations such as the DSA, that are intended to provide greater online safety including by way of notice and take down measures.

Further afield

The World Economic Forum has identified the top 10 emerging technologies of 2024, which include AI-powered scientific discovery and carbon-capturing microbes to combat the climate crisis. These and other technologies have the potential to revolutionise industries and address some of the world’s most pressing challenges.

However, global technology trends are also influenced by factors such as geopolitical tensions.  The perceived dangers of some governmental interference in technology businesses pose significant risks such as increased scrutiny on technology and data transfers, stifling innovation, costs of doing business and disrupting supply chains. Concerns about data security and influence risks have led to increased scrutiny of many technology companies and in some cases the proposed break up of such companies.

Business impacts

The global technology landscape is shaped by the differing regulatory approaches and trends. The EU’s emphasis on comprehensive regulatory frameworks aims protect consumer rights and data privacy while fostering innovation.

In contrast, the US’s focus on free speech and reducing regulation seeks to promote innovation, some argue at the expense of consumer protection. The UK’s efforts to maintain strong collaborative relationships with the EU highlight the importance of international cooperation in driving technological advancements and the need for businesses to operate across borders.

As we look to the future, it is crucial to recognise the potential impact of these regulatory approaches on global technology businesses. Navigating the labyrinth of diverging global regulations can be a formidable challenge, often leading to increased compliance costs, legal risks and operational hurdles. These regulatory disparities can stifle innovation, create market access barriers and necessitate strategic adjustments that may hinder growth.

While these challenges are daunting, there is room for optimism.  By developing robust compliance strategies and fostering a deep understanding of the regulatory landscape, businesses can turn these obstacles into a competitive advantage, ensuring trust, sustainable growth and innovation in a complex global market.

By Leo Moore

Leo Moore is the head of technology group and co-lead of the technology, data and comms sector at William Fry.

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