Apr 21, 2021

CBSL warns of investing in cryptocurrencies

Central Bank of Sri Lanka (CBSL) warned public of the significant risks posed to the users and the economy by the investments in Virtual Currencies (VCs) also referred to as cryptocurrencies as there are no regulatory safeguards relating to the use, investment or dealing in VCs in Sri Lanka.

The CBSL said in a press release that the risks include the users or investors having no regulatory or specific legal recourse in the event of any user or transaction related issues or disputes, high volatility of the value of the VCs, high likelihood of these currencies being associated in financing terrorist activities and used by criminals to launder criminal proceeds and violation of Foreign Exchange Regulations.

In terms of the Foreign Exchange Act No. 12 of 2017, the VCs are not identified as a permitted investment category. Therefore, purchasing VCs from abroad would lead to a violation of Foreign Exchange Regulations. Electronic Fund Transfer Cards such as debit 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.The CBSL informs the public that it has not given any license or authorization to any entity or company to operate schemes involving VCs, including cryptocurrencies, and has not authorized any Initial Coin Offerings (ICOs), mining operations or Virtual Currency Exchanges.It also stresses that the VCs are digital tokens created by private entities that can be obtained online through mining, ICOs or through VC exchanges and are not issued by Central Banks and are also not generally backed by underlying assets. The CBSL had issued this press release in response to a press release issued in February this year by the Information Technology Society of Sri Lanka requesting the CBSL to pay its attention on the cryptocurrency related transactions in Sri Lanka.