##s or the adoption of protectionist measures. my suggestion for macroprudential policy is that the international community should develop “ best practices ”. whenever possible, central banks should be entrusted with their management, drawing a clear line with monetary policy actions, and they should assure that, bis central bankers ’ speeches at a minimum, macroprudential policies are transparent ; targeted to a specific market failure or externality ; and preferably be transitory. in sum, in the case of rapid capital inflows, emes ’ central banks should : pursue as a primary objective a low and stable rate of inflation, allowing market adjustments in interest and exchange rates, unless such adjustments could lead to an unacceptable equilibrium and threaten future financial stability ; and second, if such non - equilibrium adjustments are a possibility, use transparent, well targeted and transitory macroprudential measures. now the third, and not unrelated, challenge. the recent problems facing emes ’ central banks since may and june have not been related to capital inflows, but outflows. these have generated market responses that in some cases were more violent than those in the wake of the lehman brothers collapse, in terms of exchange rate volatility and increases in long term interest rate. a key point here is that by and large, markets have differentiated among emes – those with better fundamentals and fewer vulnerabilities have fared better. the main lessons for emes : – today it is a must to have a strong external position, characterized by a low current account deficit, substantial international reserves, long duration in the public debt, and if possible contingent international financing, as in the cases of mexico, colombia and poland with the imf flexible credit line ( fcl ). additionally, it is important to have a flexible exchange rate regime, in combination with a flexible and credible inflation targeting framework. – finally, there is also a premium for conservative fiscal policies and sustainable public debt levels and projections. even with these elements in place, as ump in ae are unwinded, capital outflows will follow, domestic interest rates will increase, and financial conditions could become very turbulent. from the emes point of view the only adequate response, is one that is comprehensive and consistent, involving fiscal, financial and monetary policies. central banks cannot deal with this kind of situation alone ( say, by raising interest rates and / or selling foreign exchange in the market ). to overburden central banks with the defense of

need regulation to cover credit risk. if they only back themselves in central bank reserves, which are inherently liquid, they don ’ t need liquidity facilities. ultimately, the specific requirements may well be different from those applicable to banks, but the outcome will be the same – that systemic stablecoins used as money will offer the same protection to coin holders as commercial bank money. conclusion the title of this speech is a cliche : everything that is old is new again. but i am going to end on a different cliche : the definition of insanity ( widely – and inaccurately – attributed to albert einstein ) is doing the same thing over and over again but expecting different results. as i mentioned earlier, stablecoins may be innovative in the technology they use, but the fundamental questions they pose are not new. we as central bankers and regulators need to look at them as what they propose to be – a new form of private money. this means that we will hold them to standards similar to those applicable to existing private money. it doesn ’ t matter what type of technology you ’ re using or the legal form of the firm. if a firm is offering private money on a systemic scale then it should be regulated as such. our core rules and requirements came through trial and error, often following financial crises. our work on a regulatory regime for stablecoins builds on this learning process – rather than starting at square one and expecting different results. i recognise that the themes here sound curmudgeonly. but this is not an anti - innovation message : quite the opposite. establishing a secure regulatory environment for new forms of digital money to operate within the uk will lay a foundation for sustainable innovation. as i said at the outset, if new forms of digital money can be made safe, they could potentially contribute to faster, cheaper and more efficient 4 / 5 bis central bankers'speeches payments with greater functionality. they could increase the resilience of payments. and they could even have long - term benefits for financial stability. but these opportunities can only be realised if new forms of digital money are safe – which means recognising and properly regulating the elements that are age - old. i am grateful to morgane fouche, matthew osborne, stephanie haffner, robert page and james pople - hoskins for their help in preparing these remarks. i am also grateful to antoine lallour, nicholas butt, david copple, shiv chowla, andrew hauser and