Sri Lanka’s central bank has issued a warning about the “significant risks associated with the use and investment of cryptocurrencies.” The central bank cautioned the public that “cryptocurrencies are unregulated investment products that are not recognized as an asset class in Sri Lanka.”
Sri Lanka Crypto Warning
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Sri Lanka’s Central Bank (CBSL) issued a notice last week warning of “significant risks associated with the use and investment in cryptocurrencies.”
Sri Lanka’s monetary authorities explained that they have recently received complaints indicating that “the general public has suffered significant losses from crypto investments and in certain cases has also been subject to financial fraud perpetrated through crypto-related schemes.”
Referring to the warnings it made between 2018 and 2022 about the financial, operational, legal, and security risks associated with cryptocurrencies, the central bank said, “These risks and concerns have already been embodied by the recent failures of various global institutions engaged in the cryptocurrency business and the collapse and loss of value of some cryptocurrencies. have already materialized through the loss of value,” and emphasized that:
We inform the public that cryptocurrencies are an unregulated investment product that is not recognized as an asset class in Sri Lanka. Furthermore, cryptocurrencies are not considered legal tender in Sri Lanka and there are no regulatory safeguards for their use in the country.
On March 18, 2021, the Central Bank announced a series of regulations restricting the use of electronic funds transfer cards (EFTCs), including debit and credit cards, for payments related to virtual currency transactions The CBSL has stated that cryptocurrencies operate through informal channels and that they are not considered legal tender in Sri Lanka, and that they are not considered legal tender in the country, contribute nothing to the national economy and risk the loss of valuable foreign currency for the country, it warned.
In addition, the central bank drew attention to a growing number of financial scams promising high returns from crypto investments.” These scams involve tricking individuals into getting money with the promise of high returns by investing money in cryptocurrencies or tricking individuals into investing in fraudulent cryptocurrency projects. Such scams circumvent traditional regulatory and legal protection mechanisms, resulting in individuals losing their hard-earned money,” CBSL explained.
The central bank continued:
We also inform the public that the CBSL has not issued any licenses to operate schemes involving cryptocurrencies and has not authorized any person or business to do so.
Further, CBSL emphasizes that it does not authorize “initial coin offerings (ICOs) or any variant thereof, cryptocurrency mining operations, cryptocurrency exchanges, deposit handling or custody services related to cryptocurrencies, or cryptocurrency investment advisory services.”
At the end of the notice, the BOJ urges “those engaged in promoting or facilitating investment or trading in cryptocurrencies to refrain from such activities in light of the various risks associated with cryptocurrencies and the hardships to the public, including financial losses, that may result from such activities.”
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