They may be tempted to impose unduly restrictive rules in response to the challenge they face, arising from the complexity and dynamism of technology. Or they could be tempted to lower standards to encourage innovation and attract business, leading to the exploitation of regulatory arbitrage by firms.
In European jurisdictions the volume of investment in FinTech companies appears to be negatively correlated with the stringency of financial regulation.34 While the optimal point in this trade-off may be difficult to find, it needs  33 34  Realistically, one has to recognise that national security concerns may in certain cases dictate limits to cross-jurisdiction cooperation in this field.