Innovation and regulation are very closely connected, especially in financial technology. The adoption of new or onerous financial regulation, or its misapplication, can affect the creation of innovation in financial technology.
For example, including new FinTech into the application of anti-money laundering and counter-terrorist financing laws, if done disproportionately, can bankrupt new and emerging FinTech companies and cause new investment in the area to be aligned elsewhere.
On the other hand, because some new areas of FinTech are providing financial services to consumers in areas that were traditionally regulated and supervised within the banking sector, they may present risks to consumers when unregulated when they wholesale move away from a supervision. An example of this is in respect of disclosures of risks to consumers and interest rates that are applied for some new FinTech products and services.
In evolving innovation areas of FinTech, it is important to strive for achieving balance between regulation and innovation to encourage economic growth and leadership while ensuring consumer protection and protection of the financial system.