Sri Lanka Central Bank Warns About Cryptocurrency Risks and Unlicensed Exchanges

Some of the countries are starting to raise awareness about the crypto-industry as the demand is very high but some of them are having general policies already outlined. Lately, crypto-related talks became very popular in Sri Lanka and the Central Bank of Sri Lanka published an official announcement, regarding cryptocurrencies. They stated that the announcement was important and timely, as there were a lot of questions and inquiries on virtual currency usage in the international and domestic markets, this is why the authorities decided to make it clear for the public what are the crypto-related risks and what should they be waiting for after investing in it.

In an official statement, we read that, there are no regulatory safeguards to the usage and trading with cryptocurrencies in Sri Lanka, but everyone should bear in mind that investing or using VCs in the country contains significant risks.

There are several risk factors that the central bank wanted to be well-known to the public. First, In the case of any consumer or transaction-related problems or lawsuits, users/investors may have no administrative or specific legal remedies. Secondly, virtual currencies are very volatile and their price is dependent on speculations and investors might risk their funds. Digital coins are highly likely to be linked to terrorism funding and used by criminals to launder illegal proceeds.

The central Bank also emphasized the possible violations of Foreign Exchange Regulations. As the cryptocurrencies are traded as assets in exchanges, buying them from abroad could lead to a violation of Forex regulations, as they are not identified as a permitted investment. Electronic Fund Transfer Cards (EFTCs), such as debit and credit cards, are also prohibited from being used to make purchases in foreign currency for virtual currency transactions in the nation.

This official statement is not the first document that was published regarding crypto-risks by the Central Bank of Sri Lanka. The previous version was published in 2018, however, the general environment of the crypto-industry is massively changed after that. They have also specified that there is no company that is operating in Sri Lanka and has the license to operate schemes involving virtual currencies, any not authorized ICOs, or even mining.