The Potential Unforeseen Consequences of Government Tech Regulation

In the fast-paced world of technology, governments worldwide are struggling to keep up. As digital threats and online harms grow more sophisticated, policymakers are pushing for new regulations to protect citizens and businesses. From proposals to ban ransomware payments to sweeping legislation like the UK’s Online Safety Act, these efforts are often born from good intentions. The problem is that what sounds like a logical solution on paper frequently becomes a counterproductive, unenforceable, or even harmful reality. This gap between legislative intent and operational reality is a defining challenge of our time.

The Ransomware Payment Paradox

Let’s start with the idea of banning ransomware payments, an issue on which my co-founder Paul Starr shared his thoughts in an IT Channel Oxygen article last week. Like Paul, I have mixed feelings about the idea of such a ban. The goal is undeniably noble: by cutting off the financial lifeline of cyber criminal organisations, we could theoretically cripple their operations. It’s a simple, elegant idea. The problem is that its elegance disappears the moment we try to apply it to the real world.

The first issue is that it essentially criminalises the victim. An organisation that’s been hit with a ransomware attack is already in a state of crisis. Critical systems are down, data is locked, and every minute of downtime costs money and can put people’s safety at risk. In this scenario, paying the ransom is often the quickest, and sometimes only, way to restore operations. Forcing these organisations to choose between breaking the law and shutting down their business is a morally and practically untenable position.

Further, a payment ban gives cyber criminals a new weapon. Imagine a company pays a ransom secretly to get their systems back online. The criminals, knowing the company has violated the law, can now use that information to blackmail them again. “Pay us again,” they can say, “or we’ll report you to the authorities for making an illegal payment.” Instead of deterring crime, the law could create new avenues for it.

This is in stark contrast to how we handle similar situations in the physical world. We don’t criminalise the families of kidnapping victims for paying a ransom because we understand they are acting under extreme duress. We recognise that the crime lies with the kidnapper, not the person trying to save a life. Yet, with ransomware, we’re proposing a double standard that places the burden of legal jeopardy on the victim. A more effective approach would be to double down on existing legal frameworks that already target terrorist financing and to focus our enforcement efforts squarely on the criminals, not the victims.

The UK’s Online Safety Act: Ambitious Reach, Questionable Grasp

The UK’s Online Safety Act is perhaps the most ambitious attempt by a government to regulate online spaces. Its primary goal is to make the internet safer for children and to combat genuinely harmful content. These are goals that few would argue against. However, the act’s broad scope and vague definitions create a regulatory quagmire that threatens to stifle innovation, chill legitimate speech, and prove largely unenforceable against the global nature of the internet.

The legislation places a monumental burden on platforms to assess “risk” for a vast and ill-defined range of content. The act provides little concrete guidance on how a platform, especially one that handles billions of pieces of content daily, can consistently and fairly make these determinations. How does an automated system distinguish between legitimate political satire and harmful misinformation? How does it interpret cultural context or nuance? The act forces platforms into a constant state of uncertainty, leading them to either over-censor content to avoid fines or face legal penalties for what a regulator deems “harmful” after the fact.

The Enforcement Reality Gap

Both the potential ransomware payment ban and the Online Safety Act share a common, critical weakness: they rely on a level of government capability and technological sophistication that arguably simply don’t exist.

Effective enforcement of a ransomware payment ban would require law enforcement to trace complex cryptocurrency transactions across multiple jurisdictions. These transactions are often deliberately obscured using techniques that require technical expertise most law enforcement agencies lack. The result is often selective enforcement, with small, visible organisations bearing the brunt of the penalties while sophisticated criminals continue to operate with impunity.

Similarly, regulating online content on a global scale is a Herculean task. Harmful content can be hosted anywhere in the world and can move between platforms faster than any regulator can respond. Determined bad actors will always find platforms that operate outside the reach of these regulations, making the rules a burden on legitimate businesses and users without meaningfully improving safety. The global nature of the internet is its greatest strength, but it is also what makes it nearly impossible to govern with traditional, nation-state-based regulations.

Unintended Consequences and Innovation Stagnation

The most concerning aspect of these well-intentioned regulations is their potential to actively harm the very interests they claim to protect. Strict content moderation requirements often lead platforms to err on the side of caution, resulting in over-removal and the censorship of legitimate speech to avoid fines. Small platforms and startups, lacking the resources to build comprehensive compliance systems, may simply choose to avoid regulated markets altogether, which reduces competition and stifles innovation.

A ransomware payment ban could also have perverse effects. Organisations might delay reporting attacks to avoid scrutiny over their payment decisions, which would reduce the overall visibility into cyber security threats and make it harder for everyone to defend against them. Furthermore, it could push payments into less traceable, and potentially more dangerous, channels.

Innovation suffers when companies must navigate a complex and uncertain regulatory landscape. Resources that could be used to develop better security tools, more effective content moderation technologies, or privacy-preserving solutions are instead diverted to legal fees and compliance departments. Regulatory uncertainty itself becomes a barrier to entry, favouring large, established players who can afford the costs over nimble startups that might develop groundbreaking solutions.

A More Thoughtful Approach

This is not to say that the government has no role in addressing cyber security and online harms. But its role should be more targeted, more humble, and more respectful of the complex tradeoffs involved in technological systems. Instead of broad mandates with uncertain enforcement, governments should focus on areas where they have clear authority and capability.

For ransomware, this means strengthening international cooperation to prosecute cyber criminals, improving information sharing between the government and the private sector, and investing in the technical expertise needed to trace and disrupt criminal networks. For online safety, it means supporting research into better content moderation technologies, promoting digital literacy education, and effectively enforcing existing laws against fraud and exploitation.

The challenge of governing in the digital age requires a more nuanced approach than we are currently seeing. Well-intentioned policies might provide political satisfaction and the appearance of decisive action, but they often fail to achieve their stated goals while creating new problems and stifling beneficial innovation. The future of technology governance lies not in expanding government authority over digital systems, but in finding sophisticated ways to harness market forces, technical standards, and user choice in service of the public good. We must demand a more thoughtful approach that matches the complexity of the problems we’re trying to solve.