enhanced by big data and pattern recognition algorithms. but technology risks may be higher, such as runaway algorithms or cyber criminals stealing customer information. 3 / 7 bis central bankers'speeches then there is the question of systemic or macro - financial risks. here we simply do not know enough. but here are a couple of points to ponder : the failure of a robo - advisor could potentially lead to contagion among other algorithm - driven service providers. this could present systemic risk if investors seek to withdraw their investments in securities through fire sales. the pro - cyclicality arising from algorithms is another unknown, as the interaction between algorithms could exacerbate market trends. often, with these risk assessments of fintech, there is a certain “ fear of the unknown ” or tendency to “ imagine the worst ”. a degree of conservatism and caution are indeed laudable virtues for regulators, but we should guard against taking too pre - emptive an approach when dealing with the uncertainties of fintech. regulators need to keep pace with innovation but regulation itself must not front - run innovation. introducing regulation prematurely may stifle innovation and potentially derail the adoption of useful technology. mas ’ approach is to apply a materiality or proportionality test. this means regulation kicks in only when the risk posed by the new technology becomes material or crosses a certain threshold. and the weight of regulation must be proportionate to the risk posed. in 2015, mas laid out a vision for a smart financial centre, where innovation is pervasive and technology is used widely. and a smart financial centre needs smart regulation – that promotes innovation while safeguarding public confidence and financial stability. we are still learning and our approaches still evolving, but let me share with you three aspects of our regulatory response to fintech. first, using a regulatory sandbox to test new ideas in a confined environment. second, harnessing supervisory technology, or suptech as we call it, to carry out supervision in a more efficient and effective manner. third, strengthening cyber security across the financial industry to make it safer to use new technologies and instil confidence in consumers. regulatory sandbox mas launched a regulatory sandbox in june last year, to enable financial institutions and fintech start - ups to conduct live experiments with innovative financial products or services. these firms do not need to fully meet the relevant regulatory requirements at the onset. to ensure that the consequences of any failure are contained, the experiments are conducted within agreed boundaries, such as

in the patterns of trade, production and growth in the coming years. the adjustments to these changes will be neither easy nor smooth. as unemployment in some advanced economies mount, the risk of trade and financial protectionism rises. rapid changes in the real economy will generate greater uncertainty, and potentially greater volatility in financial markets. over the next few years, asia is likely to grow more slowly compared to pre - crisis days, when external demand from advanced economies weakens. to sustain growth, asian economies with big domestic markets will need to continue with structural reforms to boost domestic demand. smaller asian economies will have to re - orientate their economies to respond to new opportunities in these markets. the cross - border production and supply - chain networks, which have been so efficient in raising asia ’ s exports to the rest of the world, remains valuable but will have to be increasingly re - orientated towards raising domestic and intraasian consumption of final goods and services. measures to encourage new investments in the corporate sector and in public infrastructure, as well as in education and healthcare, will be necessary for most asian emerging economies in order to realize their growth potential. the basic outline of changes is well understood, but crafting the details of these changes, and calibrating the pace of implementation, will need thoughtful work. the build up of domestic demand would probably be a gradual process, as experiences of japan and germany suggest that reducing a nation ’ s export dependence involves major structural changes that evolve over an extended period of time. nevertheless, i am optimistic that asia will be able to respond to these challenges, to achieve its longer term growth potential and contribute towards more sustainable global growth. financial regulations and development let me now turn to the third set of challenges : financial regulations and development. financial authorities are now working intensely in various fora, such as the financial stability board and basel committee, on regulatory reforms and cross - border cooperation. the major themes relate to new capital and liquidity frameworks and linking these to systemic risks ; dealing with the moral hazard problem of individual institutions becoming “ too big ”, or “ too connected ” to fail ; cross - border coordination and resolution regimes ; redefining accounting rules and building counter - cyclical buffers to address pro - cyclicality ; adherence to global standards and others. in many areas, measures have already been agreed and implemented. many of these changes will be relevant to asia, and we need to abide by global standards. however, following the asian crisis, significant