Central Bank of Sri Lanka Warns of ‘Significant Risks’ in Using and Investing in Crypto

Central Bank of Sri Lanka Warns of ‘Significant Risks’ in Using and Investing in Crypto – Last week, the Central Bank of Sri Lanka (CBSL) cautioned the public about the “considerable risks” linked with the utilization and investment in cryptocurrency. The Sri Lankan monetary authority explained that it recently received complaints showing that “members of the public have incurred heavy losses on their crypto investments and in certain instances have also been subject to financial scams conducted through crypto-related schemes.”

Referencing its previous warnings from 2018 to 2022 about financial, operational, legal, and security risks related to cryptocurrency, the central bank stated, “These risks and concerns have already materialized with the recent failures of various global institutions engaged in cryptocurrency businesses, and the collapse and loss of value of some cryptocurrencies.” 

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Emphasizing: “The public is reminded that cryptocurrencies are unregulated investment instruments which are not recognized as an asset class in Sri Lanka. Further, cryptocurrencies are not considered as legal tender in Sri Lanka and have no regulatory safeguards relating to their usage in the country.” The central bank introduced a new set of rules on March 18, 2021, which limit the usage of Electronic Fund Transfer Cards (EFTCs), such as credit and debit cards, for virtual currency transactions. 

The CBSL cautioned that virtual currency operates outside formal channels, does not contribute to the national economy, and carries the potential of causing the country to lose valuable foreign currency. Moreover, the central bank cautioned about the increasing number of financial scams promising high returns from crypto investments. 

“These scams include deceiving individuals and obtaining money from them with the promise of providing a high return by investing money in cryptocurrency, as well as deceiving individuals to invest in fraudulent cryptocurrency projects. Such scams circumvent traditional regulatory and legal protection mechanisms, resulting in individuals losing their hard-earned money,” the CBSL described.

The central bank continued: “The public is also notified that CBSL has not issued any license or authorized any individual or business to operate schemes involving cryptocurrency.” Furthermore, the CBSL stressed that it “has not authorized any initial coin offerings (ICOs) or any variant of it, cryptocurrency mining operations, cryptocurrency exchanges, deposit-taking or custody services related to cryptocurrency or any cryptocurrency investment advisory service.”

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The notice concludes with the CBSL urging “those who are engaged in promoting and facilitating the promotion of investing and trading in cryptocurrency to refrain from such activities, considering the wide range of risks associated with cryptocurrency and the resulting hardships to the public, including financial losses.”

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