yielding asian assets. advanced economies represent half of global gdp but three - quarters of global market capitalisation in equity markets. a reallocation of just 5 % of advanced economy equity portfolios to emerging economies translates into a potential flow of us $ 2 trillion per year. so, the phenomenon of large capital inflows into asia is here to stay and we should learn how to handle it. large capital inflows pose two risks. first, these flows can potentially overwhelm asia ’ s ability to channel them to productive use, and create asset market bubbles – especially in real estate. residential property prices in some asian markets have increased by more than 50 % since 2009, outpacing income growth. to be sure, there are underlying structural factors supporting housing demand, such as urbanisation, growing populations, and the rise of the middle class. but surplus liquidity and rapid credit expansion fuelled by low global interest rates and large capital inflows have exacerbated asset price inflation in asia. the unwinding of asset bubbles can be rapid and extremely unpleasant. second, large capital inflows can turn into sudden outflows. sharp capital flow reversals can cause exchange rates to weaken, trigger panic in funding markets, and even result in destructive wealth effects. the unwinding of long positions in asian markets as global investors sought to de - risk their portfolios was partly responsible for the sharp selloff in many asian currencies in recent months. the most effective way to manage capital inflows is to allow interest rates or exchange rates to go up so that capital is priced appropriately. indeed, as emerging asia continues to grow, allowing the exchange rate to steadily appreciate over the medium term is vital to ensuring that capital inflows are moderated and allocated to productive investments. but interest rates and exchange rates cannot shoulder entirely the burden of adjustment to large and volatile capital flows. asian countries have been experimenting the use of so - called macroprudential tools to complement the more traditional macroeconomic tools in dealing with capital flows and asset price inflation. these include the use of loan - to - value ratios, taxes and stamp duties on asset market transactions, and minimum holding periods for assets, all of which serve to dampen demand for domestic assets. asia needs to continue refining these tools, learning from experience and adapting to different circumstances. deepening and broadening financial markets third, asia must deepen and broaden its financial markets. asia must do a better job

. and to safeguard that stability, the fsb members need to engage with these jurisdictions. we need to ensure the needle of their regulatory compass points in the same direction as ours. to do so, we want to start with positive incentives like outreach, technical workshops, and capacity building to get them prepared. we'll work closely with the imf, the world bank and other international organizations on this. however, chances are we may still see regulatory competition. and so, we cannot exclude that a toughening of regulation in one part of the world pushes crypto - asset parties to relocate to other parts of the world. parts of the world with weaker regulatory standards. what we can do, though, is require that traditional financial institutions take additional measures to manage the risks of interacting with crypto intermediaries operating in such jurisdictions. measures necessary to protect global financial stability. we are not there yet, but if you ask me, we should be heading in that direction. just like crypto - asset threats don't stop at national borders, the thread of crypto - asset risks doesn't only weave through financial stability. there are also macroeconomic risks. specifically for emerging markets and developing countries. in emdes, crypto - assets are relatively popular. the more popular they are, the more they could erode the effectiveness of domestic monetary policy. because people may start preferring crypto - assets or stablecoins over domestic currencies. this risk of currency substitution, or so - called'crypto - ization ', means emde's might face even greater risks from crypto - assets than advanced economies. a potentially dangerous cocktail of financial stability and macroeconomic risks. for this reason, the indian g20 presidency asked the fsb and the imf to combine their work on this subject in a synthesis paper. this was published in september. a key conclusion is that crypto - assets do indeed have implications for macroeconomic and 3 / 4 bis - central bankers'speeches financial stability, but even more, that these implications are mutually interactive and reinforcing. in our view, this underlines, once more, the need for a global regulatory and supervisory baseline to oversee crypto - asset activities. a baseline that addresses both financial stability and macroeconomic risks. a baseline that all national regulators can adhere to, but at the same time allows them to take targeted and time - bound measures to address jurisdiction - specific circumstances. to help emdes address these serious risks