Linklaters Tech Legal Outlook 2022: The regulatory reset for the digital economy

In 2022 technology will be critical to organisations as they adapt to a changing world and invest in a digital and more sustainable future. From AI to climate tech, fintech to space tech, innovation in tech will continue to be instrumental in powering recovery from Covid-19, enabling opportunities and offering solutions to some of the world’s greatest challenges. 

In this blog post we explore the key global trends in the technology sector that we believe will shape the legal outlook for 2022 and beyond, focussing on the biggest regulatory changes we can expect to see this year. As the regulatory landscape continues to evolve in response to the rapid pace of developments in the sector, we consider how this evolution will impact tech businesses and investors.

A climate of heightened risk and regulation

As the digital economy develops and we contemplate the metaverse, technology continues to present legal and ethical issues – issues which governments see a greater and more urgent need to address. New legislation and regulatory action made a significant impact in 2021 and with initiatives underway across the globe, businesses face a climate of heightened risk and regulation in 2022. 

A regulatory reset across the major economies

The enhanced role of technology in the economy, and the growing success and market power of Big Tech, have precipitated a regulatory reset in the world’s major economies. In 2021 governments and regulators showed they will intervene to regulate the digital economy, and address issues ranging from data privacy and AI, to online harms,  antitrust, merger control and taxation of digital services, while record regulatory fines have made a significant impact.

Global trends - common themes

Whilst each major economy is pursuing is own regulatory objectives there are some common areas of focus on the digital economy across the globe:

Data, cyber and AI

Data is both critical to powering the digital economy and a valuable asset to be commercialised. Yet there is an increasingly assertive global framework of regulation and enforcement of data usage which organisations must navigate if they are to protect data adequately and leverage it successfully.  We are also seeing the first proposals for regulation of artificial intelligence with associated requirements regarding data quality and governance. 

Antitrust and foreign investment

There have been fundamental changes in foreign investment control, antitrust enforcement, and platform regulation, creating new regulatory regimes which will shape the digital economy in 2022 and beyond.

In parallel, policy changes that anticipate what the new regimes will bring are already impacting tech transactions and major tech platforms leading to high profile antitrust cases and increasing interventions in mergers and acquisitions.

Broader regulation impacting platforms

There are various proposals for regulations promoting transparency and accountability of digital services such as content moderation and online harms.  While regulators around the world are looking to address largely similar concerns in those areas, they are adopting divergent approaches.

The approach of the major economies

The People’s Republic of China

One of the most striking interventions in the digital economy in 2021 was in China, which has turned the tide on Big Tech with a regulatory squeeze using various of the regulatory levers at its disposal. What started as regulatory scrutiny in consumer finance has quickly moved into the antitrust space and cryptoassets. More recently, the focus has been on the interoperability of apps (within so-called SuperApps), data flows and whether the largest tech platforms should be broken up.

While the China reset is impacting domestic investment, it is also creating opportunities in India and South East Asia for those leaving China’s markets or looking to diversify. Singapore, in particular, is experiencing growth as a fintech “hub”.

The European Union

The EU is pursuing a series of legislative initiatives intended to shape Europe’s digital future and, like the General Data Protection Regulation, they could inspire regulation across the globe. The EU’s bold regulatory proposes for the regulation of “gatekeeper platforms”, digital services and digital finance and payments will continue to progress in 2022.

The EU has also been a first mover in respect of proposals for an AI specific regulation, but will need to address industry concerns around the stringency of some the provisions and stifling of innovation as it balances a desire to foster an EU-wide digital economy while engendering trust in EU consumers.

The United Kingdom

The UK is also progressing ambitious plans as its position evolves post-Brexit.  It remains at the forefront of the global fintech scene and in the next 12 months we will see some major regulatory developments to support that.  It is also facing stiff competition in a global marketplace, underlining the importance of striking the right regulatory balance to support post-Brexit Britain.

Key developments expected over the next 12 months include: the implementation of revised listing rules to attract more tech companies to the UK; a regulatory response to cryptoassets and stablecoins and the EU’s MiCAR regime; a nuanced approach to the use of AI and the cloud, and alleviating certain restrictions on automated decision-making and data exports; the impact of a new more stringent foreign investment regime affecting certain tech investments; and a keen focus on antitrust in digital markets, with powers given to the new Digital Markets Unit.

The United States

The US is also experiencing a reset – with changing tides of sentiment towards US tech giants and new Biden regulatory appointees shaping the digital asset market, which has become too large to ignore. The boom in DeFi, stablecoins and NFTs has prompted federal and state regulators to actively enforce in the digital asset space but also to consider specifically regulating crypto and crypto activities for the first time.

Data protection regimes are expanding in the US on a state-by-state basis and, in the wake of the Colonial Pipeline cyber-attack, regulators are focusing on tackling cyber-crime and cyber-security compliance.

Linklaters: Tech Legal Outlook 2022

The regulatory matrix applicable to global operators in the sector is both complex and evolving. The regulatory compliance challenge for those multinationals is only growing in terms of scale and urgency.

At Linklaters we are following closely and mapping out developments in all major economies. Explore our 2022 report for more details on the legal outlook for the tech sector in 2022 and of our global team of tech-focused experts who cover the full spectrum of relevant legal issues. See also our Global Fintech Trends 2022 for insights specific to the fintech vertical.

Authors: Julian Cunningham-Day, TMT Partner and Jennifer Calver, Senior Associate at Linklaters