Regulation now shapes innovation as much as technology - here's why it's an infrastructure investment

Across sectors and regions, technological progress is advancing at a velocity that legacy governance models were not built to accommodate.

Artificial intelligence (AI), digital finance, biotechnology and platform-based services are reshaping economies, societies and labour markets. Yet regulatory systems often reflect assumptions from earlier technological eras.

Fragmented regulatory compliance costs global businesses billions annually, exceeding what most nations invest in roads, bridges and utilities combined.

Yet, unlike crumbling infrastructure, regulatory dysfunction receives little attention until it's too late: an innovation stalled, a market closed, a competitor who shaped the rules running ahead.

From Geneva to Guangzhou, a shift is unmistakable: the future trajectory of innovation will be determined as much by regulatory design as by technological breakthroughs themselves.

Infrastructure has traditionally been understood as physical systems: transport networks, utilities and energy grids. But in 2026, the regulatory frameworks governing innovation hold comparable, perhaps greater, influence over economic competitiveness.

As technologies become more complex and deeply embedded in daily life, regulation increasingly defines the boundaries of trust, access and economic participation.

This perspective underpins The Regulatory Frontier, a new whitepaper produced in collaboration with the government of the United Arab Emirates (UAE) and Boston Consulting Group. The real insight is that regulation does not just follow innovation. It shapes which ideas get built, which markets grow and which companies come out ahead.

This shift is reflected in perspectives from business leadership.

“Clear and well-designed regulation gives innovation and capital the confidence to move. For business, the next frontier of competitiveness is the ability to anticipate and influence regulation rather than merely adapt to it,” said Matteo Coppola, global leader, Risks & Compliance Practice; managing director and senior partner, Boston Consulting Group.

Pix, developed by the Central Bank of Brazil, has become one of the world’s most widely adopted instant-payment systems.

The breakthrough was not the technology; instant payments already existed. It was the regulatory choice to require universal interoperability, which stopped the market from splitting into closed, competing systems.

In just a few years, Pix was adopted by more than 150 million Brazilians. It now processes trillions of reais monthly, with transaction costs down to nearly zero for everyday users.

India’s Unified Payments Interface (UPI) digitized payments in India and created a national platform for innovation. With open architecture and regulatory leadership, it enables billions of transactions each month at virtually no cost to end users and underpins one of the world’s most dynamic fintech markets.

The government built the rails but industry built the value on top.

The UAE continues to pioneer regulatory sandboxes that allow emerging technologies, such as AI and virtual assets, to be tested under controlled oversight. However, unlike most sandboxes that become isolated experiments, the UAE built feedback loops between sandbox learnings and permanent rule-making.

This shift from static rules to iterative, evidence-based governance exemplifies regulatory systems that evolve with technological change.

A perspective from national leadership reflects this approach:

“The UAE’s experience shows that when governments treat regulation as an enabler, not a constraint, it gives innovation the conditions to thrive. Regulation designed with vision can be a bridge – connecting ambition with trust,” said Khalid Al Harmoodi, assistant secretary-general for Cabinet Affairs Support, General Secretariat of the Cabinet, UAE.

Across African markets, regulators and innovators have co-developed frameworks for mobile money, digital identity and cross-border payments. These models highlight how inclusive regulatory design can address long-standing gaps in access and support broader economic participation.

Together, these examples point to a global shift: regulation is becoming a determinant of digital competitiveness, societal trust and national resilience.

The whitepaper identifies five design domains that increasingly define effective regulatory systems:

These domains encourage the transition from static rulebooks to dynamic systems that respond to innovation rather than trail it.

Shifts across government, business and society

Regulators are increasingly seen as system designers who set the conditions for safe and inclusive innovation. Predictable, transparent rule-making is emerging as a source of national competitiveness, while fragmented approaches risk slowing progress and eroding trust.

Businesses are recognizing regulatory engagement as a strategic capability. Organizations that help shape regulatory frameworks early are better positioned to scale responsibly and build long-term credibility.

At the international level, cooperation is becoming essential. Many technological challenges – from AI governance to digital identity – are inherently cross-border, making shared principles and interoperable frameworks increasingly important.

The newly launched Global Regulatory Innovation Platform aims to support this evolution by creating spaces for shared learning and peer exchange facilitated by dialogue.

Discussions at the World Economic Forum 2026 Annual Meeting in Davos, Switzerland, continue to highlight the critical intersection of innovation, trust and global cooperation. Within this context, regulation has emerged as central to shaping future outcomes.

Well-designed regulation does not hinder innovation; it enables it to advance safely, inclusively and with public confidence. In the coming decade, the design of regulatory systems is likely to become as consequential as the technologies they govern.

The release of The Regulatory Frontier reinforces the growing recognition that advancing regulatory capability is one of the most important infrastructure investments of the digital age.