Regulation Now Shapes Innovation as Much as Technology: A Critical Infrastructure Investment in the Digital Age
January 7, 2026 | World Economic Forum
In today’s rapidly evolving technological landscape, regulation has emerged as a foundational pillar of innovation—rivaling technology itself in its influence over economic growth, market competitiveness, and societal adoption of new solutions. This shift reflects a profound transformation in how innovation ecosystems operate, underscored in a recent World Economic Forum whitepaper titled The Regulatory Frontier.
Regulation: The New Infrastructure of the Digital Era
Traditionally, infrastructure conjures images of physical assets like roads, bridges, and energy grids. However, as digital technologies like artificial intelligence (AI), digital finance, and biotechnology become deeply embedded in daily life and economic systems, regulatory frameworks are increasingly recognized as a form of critical infrastructure.
Kelly Ommundsen, Head of Digital Inclusion and member of the World Economic Forum Executive Committee, highlights that “regulation is as important as physical infrastructure in the digital age.” It establishes the legal and operational boundaries that determine levels of trust, market access, and economic participation.
This paradigm shift is vividly illustrated by case studies spanning multiple continents, where regulatory design has played a pivotal role in scaling innovation and fostering competitive markets.
Why Regulation Matters as Much as Technology
Technological advancement is occurring at unprecedented velocity, often outpacing legacy governance models fundamentally designed for earlier eras. This mismatch can result in fragmented regulatory frameworks, driving compliance costs that run into billions annually on a global scale—costs that often surpass nations’ investments in traditional infrastructure like roads and utilities.
Unlike physical infrastructure deterioration, regulatory dysfunction typically goes unnoticed until it impacts innovation: a promising technology stalls, markets lock down, or competitors who influence regulation gain unfair advantages.
Today, from Geneva to Guangzhou, it is increasingly clear that innovation’s future trajectory hinges not only on technological breakthroughs but also on regulatory design choices.
Exemplary Models of Future-Ready Regulation
The whitepaper The Regulatory Frontier, developed in collaboration with the UAE government and Boston Consulting Group, identifies several pioneering examples where forward-thinking regulation has enabled innovation to flourish.
Brazil’s Pix Instant-Payment System:
Pix’s success lies less in technology than in regulatory mandates for universal interoperability. By preventing the market from fragmenting into closed systems, Pix rapidly achieved near-universal adoption with minimal transaction costs, processing trillions of reais monthly across 150 million Brazilians.
India’s Unified Payments Interface (UPI):
India’s open, standards-based UPI platform showcases how regulatory leadership combined with an open architecture drives innovation. It supports billions of free or low-cost transactions monthly and underpins one of the world’s most dynamic fintech ecosystems.
UAE’s Regulatory Sandboxes:
The UAE advances regulation as an “iterative learning system” by allowing emerging technologies such as AI and virtual assets to be tested in controlled environments. These sandboxes feed data back into permanent policy frameworks, fostering adaptive governance rather than rigid, outdated rules.
Africa’s Collaborative Regulatory Models:
Across Africa, co-created frameworks for mobile money, digital identity, and cross-border payments demonstrate how inclusive regulation can bridge long-standing access gaps and promote widespread economic participation.
Framework for Designing Effective Regulation
The whitepaper identifies five design domains critical for crafting regulatory systems capable of supporting ongoing innovation:
- Boundaries: Clear yet flexible rules that allow room for innovation.
- Learning Systems: Mechanisms to iteratively update regulations based on real-world evidence.
- Market Access: Fair and trusted participation frameworks for new entrants and incumbents alike.
- Shared Infrastructure: Policies that promote interoperability and reduce barriers.
- Adaptability: Rules that evolve alongside technological progress.
Together, these domains encourage dynamic regulatory models that respond to innovation instead of trailing behind it.
Shifting Roles: Governments, Businesses, and Global Cooperation
Regulators are increasingly seen as system designers—architects of trust and inclusion who enable safe, scalable innovation. Predictable, transparent rule-making is becoming a core component of national competitiveness. Conversely, fragmented or outdated regulatory approaches risk impeding progress and eroding societal trust.
Businesses are adapting by elevating regulatory engagement to a strategic capability. Companies that proactively shape emerging regulatory frameworks position themselves for responsible growth and long-term credibility.
Given the inherently cross-border nature of challenges like AI governance and digital identity, international cooperation is becoming essential. Initiatives like the newly launched Global Regulatory Innovation Platform foster shared learning and peer exchange to harmonize regulatory advancements worldwide.
Looking Ahead: Regulation as a Catalyst for Innovation
At the World Economic Forum’s 2026 Annual Meeting in Davos, the interplay between innovation, regulation, and trust remains a focal point. Rather than a constraint, well-designed regulation is increasingly viewed as a critical enabler for technological progress that is inclusive, safe, and grounded in public confidence.
As the whitepaper The Regulatory Frontier reinforces, advancing regulatory capabilities is one of the most consequential infrastructure investments of the digital age—one that will shape the future of economies, societies, and global cooperation.
For more insights and to explore The Regulatory Frontier whitepaper, visit the World Economic Forum’s digital platform.
Related Topics: Artificial Intelligence, Digital Finance, Emerging Technologies, Digital Inclusion, Global Governance
Author: Kelly Ommundsen, Head of Digital Inclusion, Member of the Executive Committee, World Economic Forum
Photo Credit: Kvalifik on Unsplash
This article may be republished under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Public License.
