With technological disruption upon us, how can regulators keep up – and what is the right way to do so?
By Jennifer Dhanaraj
What is “masterly inactivity”?
The phrase quickly became a trending topic throughout the second day of the TechLaw.Fest conference on 5 April after it was first used by Dr Vivian Balakrishnan, Minister-in-Charge of the Smart Nation Initiative, in his opening remarks.
The crux of masterly inactivity is keeping up to date with the latest developments and trends, but not necessarily directly regulating the disruptive activity.
According to Dr Balakrishnan, a good example of this approach is the response of the Monetary Authority of Singapore (MAS) towards cryptocurrency.
For instance, MAS has chosen not to regulate crypto-tokens directly. Instead, the organisation focused on the activities associated with tokens, evaluating the different risks related to these tokens and considering the appropriate responses to deal with those risks.
“This approach is masterly because there is actually a plan that ensures that we don’t get in the way,” said Dr Balakrishnan, who also mentioned that it is the preferred approach to regulation when it comes to major technology trends, as opposed to a more passive “wait and see” way.
In a panel discussion titled “Smart Regulation for Smart Nation” during the conference, the panellists, including regulators and representatives from tech companies, constantly went back to “masterly inactivity” to describe how the government can approach regulations toward disruptive tech companies and start-ups.
Nathaniel Mangunsong, the group general counsel of ride-hailing tech company Go-Jek, said that such an approach ensures that innovation is not stifled.
According to him, it can lead to ways in which tech companies can self-regulate or even work with the government authorities to co-regulate in areas that need addressing.
Echoing the same sentiment, regulatory lawyer Lim Chong Kin from Drew & Napier said that it ensures that regulation is not merely an end but something that is designed to achieve clear policy objectives.
“Regulators have to be mindful of the consequences of wanting to go the full way with regulations. Regulations also require constant oversight and the resources to enforce it,” he said.
Therefore, he added that masterly inactivity allows regulators to evaluate the risks properly and then decide on regulations to mitigate them.
Regulating risks
During his speech at the conference, Dr Balakrishnan also pointed out seven trends in the tech space that are affecting policy regulation and the law, one of which is the “accelerated clock speed of technology”.
He emphasised that tech trends will transform society and the ways in which people “work, play, communicate, organise and mobilise” themselves.
This is why it is crucial for the legal sector to not ignore developments in the tech sector, and for the legal sector and regulators to work together to address important issues popping up due to the “technological revolution”.
“If in real life, you need some norms and regulations, how could we ever believe that suddenly in cyber space – behind the mask of anonymity – you don’t need anything at all?” he asked.
For example, allocation of risk with the rise of robotics and artificial intelligence will be an issue that lawyers and regulators will have to grapple with.
Bringing up the death of a pedestrian caused by an Uber autonomous vehicle in Arizona in March, he said: “We will have to sort out the allocation of risk and accountability”
Regulatory sandboxes in play
In light of these tech trends, how do regulatory agencies ensure that companies have room to innovate while not completely disrupting the institutions here? A regulatory sandbox is an approach used by various agencies as it allows them to anticipate problems and craft policies to regulate risk with any disruptive activity.
For instance, the MAS has built a safe and sound environment that will encourage and allow innovative firms to experiment with ideas and new business models, said Ms Jo Yeo, the MAS deputy director of fintech and innovation group.
But regulatory sandboxes are not just for regulators handing out licenses.
The Personal Data Protection Commission (PDPC) have also created their own distinct sandbox to test ideas and concepts that can make improvements to the Personal Data Protection Act (PDPA).
“The sandbox allows organisations to work through several details with regulators, before finalising and putting it into the act,” explained PDPC’s Assistant Chief Executive Yeong Zee Kin.
For instance, with new technology, data might be used in a different way but companies may not be able to get fresh consent as it is difficult and costly.
“So how do we bring down these hurdles? That is why it is important to work and identify some of these issues with willing organisations before finalising the law,” said Mr Yeong, who also referred to a co-running hackathon at the conference as one way to get some new ideas.
“At the hackathon, we created a few problem statements along with some guidelines and asked participants to come up with technology that will help companies comply,” he said.
One problem statement was: “Organisations, especially SMEs, might need help to draft privacy statement(s) as it might be costly for them to engage professional legal services to do so. How might they obtain a privacy statement(s) within specified parameters that are customised to their organisation’s needs?”
While regulatory sandboxes have been successful, Ms Yeo said that they might have been too successful.
"We should relax (our) criteria more because we have had only successes and usually, we tend to learn more from failures,” she explained.
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