8  Gruber J., Kamin S. (2005) “Explaining the Global Pattern of Current Account Imbalances”, Board of Governors of the Federal Reserve System International Finance Discussion Papers Number 846, November 2005; Mendoza R.(2004) “International Reserve-Holding in the Developing World: Self Insurance in a Crisis-Prone Era?” Emerging Markets Review 5(1); Aizenman J., Lee J. (2005) “International Reserves: Precautionary vs. Mercantilist Views, Theory and Evidence”, IMF Working Paper WP/05/198, October 2005; Gosselin M-A. Parent N. (2005) “An Empirical Analysis of Foreign Exchange Reserves in Emerging Asia”, Bank of Canada working paper 2005-38, December 2005; EBC (2006) “The Accumulation of Foreign Reserves”, Occasional Paper No. 43, International Relations Committee Task Force, February 2006. 9  Caballero R., Farhi E., Gourinchas P. (2005) “An Equlibrium Model of Global Imbalances and Low Interest Rates”, mimeo, MIT, September 2005; Faruqee H., Laxton D., Muir D., Pesenti P. (2005b) “Smooth Landing or Crash? Model-Based Scenarios of Global Current Account Rebalancing”, NBER working paper 11583, August 2005. 10  Gourinchas P-O., Rey H. (2005) “From World Banker to World Venture Capitalist: US External Adjustment and The Exorbitant Privilege”, working paper UC Berkeley, August 2005; Lane P., Milesi-Ferretti HG-M. (2005) “Financial Globalization and Exchange Rates”, IMF Working Paper WP/05/3, January 2005; Lane P., Milesi-Ferretti G-M. (2005b) “A Global Perspective on External Positions”, IMF mimeo, July 2005. 11  Engel C. Rogers J. (2006) “The U.S. Current Account Deficit and the Expected Share of World Output”, NBER working paper 11921, January 2006;  12  Hausmann R., Sturzeneger (2005) “Global imbalances or bad accounting?

They are increasingly a source of finance for UK businesses. However, the ‘dash for cash’ in March 202011 led to a rapid deterioration in the functioning even of advanced-economies’ government bond markets and created market dynamics significant enough to raise the cost of lending. The episode clearly demonstrated the need to build resilience in market-based finance. 12  Given the global nature of market-based finance, the effectiveness of any policies in the UK will depend in part on policies implemented in other major jurisdictions. We are therefore working with international counterparts in the Financial Stability Board to take coordinated action to address these issues – including on open-ended funds, margins, the liquidity structure and resilience of core markets, to name a few. In the meantime, the FPC (and other UK authorities) need to continue monitoring them, starting by ensuring there is reliable data to do so. 2.The growth of cryptoassets and decentralised finance: regulatory frameworks need to evolve Another important challenge is seen in cryptoassets and decentralised finance (DeFi) which in recent years have grown to represent around 1% of global financial assets.13 Cryptoasset technology is creating new financial assets, and new means of intermediation. Many services now facilitated by this technology mirror those available in the traditional financial sector, including lending, trading and exchange, investment management and insurance. While that activity is currently small, if the pace of growth seen in recent years continues, interlinkages with the traditional financial sector are likely to increase.