Securities Regulation in 2047

Introduction

The year 2047, when Hong Kong will fully rejoin China, represents a distant future that challenges our predictive capabilities. Thirty years ago, the commercial personal computer was nascent, and few could envision the internet's transformative power.

In 1986, we lived in a relative stone age regarding information access, data exchange rapidity, and processing power. Many struggled to believe computers would surpass humans at chess, and none could conceive of investing in decentralized autonomous organizations—as recently demonstrated by the Ethereum DAO's disappointing results.

"Despite our poor predictive abilities, the rate of technological improvement is accelerating, and regulators are not becoming any more able to predict how markets and financial behaviors will be affected by emerging technologies."
— Barney Frank, Big Think

1986

Personal computers emerge

2016

Fourth Industrial Revolution

2047

Securities regulation transformed

Macro-Level Trends

Four robust patterns likely to be sustained through 2047

Urbanization

The ongoing trend of human populations gathering in increasingly dense urban spaces, simultaneously giving rise to increasing wealth and innovation.

Regional Economic Disparity

Benefits from innovation tend to be experienced first in areas of highest economic standards and slowly dispersed to lower economic conditions.

Technological Innovation

Once useful technology is released, it doesn't go back and ultimately participates in compounding increases in complexity.

Power of Resource Control

Influence is gained through controlling access to limited and valued resources.

Emerging Technologies

Key technologies shaping the fourth industrial revolution

Blockchain

Distributed ledger systems and smart contracts

Blockchain Technology

Distributed ledger systems and smart contracts have the potential to disintermediate the world of finance, allowing financial transactions to occur at close to zero marginal cost. Blockchain technology promises to increase trust and security through elimination of human actors who can manipulate processes.

Zero marginal cost transactions
Elimination of back office work
Highly secure and public records
Decentralized Autonomous Organizations (DAOs)

Artificial Intelligence

The most powerful singular force of change

Artificial Intelligence

AI is possibly the most powerful singular force of change among all emerging technologies. Increases in AI power seem necessary for managing exponentially increasing amounts of data as the remaining 50%+ of world population and trillions of physical objects come online.

Processing exponential data growth
Replacing jobs across skill levels
Enabling advanced DAOs
Supercomputer access via cloud

Internet of Things

100 trillion sensors by 2030

Internet of Things (IoT)

From 13 billion sensors in 2016 to an estimated 100 trillion by 2030. These sensors will track and quantify interactions between objects and people, enabling transactions between objects without human intermediaries.

13B sensors (2016) → 100T sensors (2030)
Object-to-object transactions
Supply chain transformation
Fraud reduction through tracking

Quantum Computing

Exponential computational power

Quantum Computing

Expected to thrive on problems involving truly massive data sets. In combination with IoT sensors and blockchain records, quantum computing may provide new models of financial systems far more powerful than current capabilities.

Massive data set processing
Real-time predictive models
Global transaction analysis
Unprecedented financial insights

Convergence of Trends

How different trends will fit together

Increased Power of Capital

Disintermediation of Traditional Powers

Automation

Blockchain

Smart Contracts

Key Implications

Labor Market Erosion

Increased automation, AI, and disintermediating technologies will destabilize employment-based wealth generation while making capital flows increasingly fluid.

Accelerated Development

Developing nations may leap-frog directly to advanced technologies, shortening the traditional development cycle and period of middle-class wealth development.

Skill Commoditization

Even professional skills and knowledge may become commoditized, reducing their value to the cost of accessing necessary hardware and software.

Securities Regulation in 2047

What this means for financial regulation

Regulatory Challenges

Keeping Up with Innovation

Regulators will face extreme pressure to employ AI, blockchain, and distributed ledgers to ensure market stability.

International Cooperation

Nationalist sentiment and unemployment may challenge multilateral agreements for integrated financial markets.

AI Decision Making

Regulators must grapple with instructing AIs in regulatory decisions and determining regulation purposes.

Rapid Change Cycles

Arms race in AI applications will lead to increasingly rapid cycles of significant economic change.

The Future Landscape

AI-Driven Regulation

Financial regulators may require the use of artificial intelligence instead of statistically inferior human actors in securities markets.

Concentrated Capital Power

High capital parties will exert stronger-than-ever influence over regulation shaping due to reduced government cooperation.

Quantum-Powered Models

Quantum computing will enable massively more advanced modeling of market activity and financial systems.

Key Takeaway

"Fundamentally, it is extremely difficult to make any accurate predictions about 30 years into the future. Nonetheless, I hope this thought experiment reveals some important trends and topics worth thinking about."
— Alex Makosz

Document Information

Title: Securities Regulation in 2047

Author: Alex Makosz

Object: Strategic Foresight

Year: 2016