Governing the digital economy demands a post-financial crisis scale of commitment, argues Dr Paech

Could the digital economy be heading for its own 2008? In a new working paper, Regulatory governance of the digital economy: Lessons from the financial services sector, written for the OECD, Dr Philipp Paech argues that the regulators now overseeing digital markets face precisely the difficulties that overwhelmed their counterparts in financial services before the Great Financial Crisis: cross-border operations that outrun territorial authority, innovation that outpaces legislation, systemic risk that travels through networks, and information asymmetries that leave supervisors a step behind. Drawing on eighteen case studies spanning the 2008 crisis and the subsequent rise of digital finance, the paper isolates six recurring regulatory challenges and, for each, sets out the lessons the financial sector learned at considerable cost. Its central contention is bracing in its simplicity: the structural parallels run deep enough that the digital transformation cannot be governed cheaply, and will demand institutional commitment – anticipatory, adaptive and internationally co-ordinated – commensurate with the post-crisis overhaul of financial regulation. For anyone weighing how democracies should govern the technologies now reshaping them, the argument repays close attention.