Sri Lanka’s central bank issues warning regarding cryptocurrency risks
The Central Bank of Sri Lanka (CBSL) has warned its citizens to be wary of crypto investments. In a public notice released on 9 April 2020, the CBSL underlined a host of activities that could put the investors at risk. The activities highlighted revolved around ICO investments, trading on crypto exchanges, and cryptocurrency mining.
The absence of a strong crypto-regulatory framework in Sri Lanka, prompted the central bank to issue such a statement.
The CBSL apprised retail investors about the high-volatility nature of the crypto ecosystem. This factor, as pointed out, could potentially expose investors to significant financial losses.
The bank then expressed its concern about cryptocurrencies being affiliated with money laundering, terrorism financing, and other similar criminal activities and also accentuated the absence of a concrete regulatory resort and highlighted that it would make the investors feel handicapped during disputes.
The CBSL said,
“The public is therefore warned of the significant financial, operational, legal, customer protection and security related risks posed by investments in VCs to the users as well as to the economy.”
Pointing out the legality, it further clarified,
“The public is also informed that CBSL has not given any license or authorization to any entity or company to operate schemes involving VCs, including cryptocurrencies, and has not authorized any ICOs, mining operations or Virtual Currency Exchanges.”
Despite publishing this notice, it ought to be noted that, the central bank has already begun testing the crypto waters through its national project.
The bank also called attention to the Foreign Exchange Regulations in Sri Lanka. The bank said that Virtual Currencies (VCs) aren’t identified as a permanent investment category according to their Foreign Exchange Act.
It also said,
“Electronic Fund Transfer Cards (EFTCs) such as debit cards and credit cards are also not permitted to be used for payments in foreign currency related to virtual currency transactions, in terms of the Foreign Exchange Regulations in Sri Lanka.”