The prolonged period of unusually low inflation during past decades allowed central banks to conduct extremely accommodative monetary policies for a very long time. This has contributed to a significant buildup of global financial vulnerabilities, including stretched valuations of risk assets, high house prices, and record high private and public debt.1  •  For small open economies, especially those from emerging markets, the challenge is to maintain stability in the face of more volatile capital flows, large swings in exchange rates, and tighter global financial conditions. The steep appreciation of the US dollar poses significant risks, particularly for those countries with high external vulnerability. Many have had to follow the aggressive tightening of policy by the Fed. •  That said, the overall repercussions of advanced economy policy tightening on global financial markets have--thus far--been remarkably orderly. There have been no major dislocations in emerging market capital flows and there has been clear differentiation based on country-specific fundamentals. Asian economies overall have exhibited resilience. Capital outflows have been less  1 In Q1/2022, global house prices, in nominal terms, are rising at a rate of 10.2%, in real terms (once adjusted for inflation) is closer to  3.3%. The rate of real house price growth has now declined for two consecutive quarters (Figure 2).
First-generation crypto-assets were born of a desire to create a disintermediated means of payment that would not have an issuer and that would circulate on decentralised settlement infrastructures beyond the control of banks and governments. As a result of this, their actual footprint remains marginal, however much media attention they may receive. Furthermore, as intermediaries in exchanges, these assets are far less efficient than our existing currencies, for a variety of reasons, including their volatile prices, transaction costs and transaction times, which make it hard to use these assets as a means of payment, plus the risks to which users and service providers are exposed. Stablecoins seek to remedy the shortcomings of first-generation 1/4  BIS central bankers' speeches  crypto-assets, especially their volatility, by being backed by real assets. But even with Stablecoins, the whole crypto-asset payment chain remains highly exposed to a range of risks, from legal, financial and operational risks, to major vulnerabilities in terms of money laundering and terrorist financing, and consumer and investor information and protection issues, including a non-zero risk of capital loss even in the case of Stablecoins. There are also issues, in our countries upholding the Rule of Law and in our regulated market economies, in terms of complying with core competition and privacy principles.