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The Central Bank of Sri Lanka (CBSL) has issued a warning to the public against making crypto purchases citing the lack of regulations and risks associated with cryptocurrencies. The warning came amidst worsening political and economic turmoil as protestors seized President Gotabaya Rajapaksa's residence in Colombo.
In a blog post on Tuesday, the CBSL reminded the public that it had not issued any license or authorized any company to offer crypto-related services in the country. The monetary authority issued the warning in response to “recent developments in relation to virtual currency usage,” which is like in reference to the current crypto market downturn that dragged the prices of popular cryptos such as Bitcoin (BTC) and Ether (ETH) to their lowest levels this year.
“As informed to the public previously by CBSL through press releases in 2018 and 2021, 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 Initial Coin Offerings (ICO), mining operations or Virtual Currency Exchanges,” the Central Bank of Sri Lanka wrote in a blog titled “‘Public Awareness in Relation to the Use of Virtual Currencies in Sri Lanka.”
To further dissuade the public from engaging in crypto trades, the CBSL also highlight the lack of regulatory sight and safeguards in crypto transactions.
“Furthermore, as per the Directions No. 03 of 2021 under Foreign Exchange Act, No. 12 of 2017 issued by the Department of Foreign Exchange of CBSL, Electronic Fund Transfer Cards (EFTCs) such as debit cards and credit cards are not permitted to be used for payments related to virtual currency transactions,” the central bank added. “Therefore, VCs are considered as unregulated financial instruments and have no regulatory oversight or safeguards relating to their usage in Sri Lanka.”
The regulator also warned of potential losses due to security related risks such as crypto scams. “The public is therefore warned of the possible exposure to significant financial, operational, legal and security related risks as well as customer protection concerns posed to the users by investments in VCs,” the bank added. “The public is also warned not to fall prey to various types of VC schemes offered through the Internet as well as other forms of media.”
Thousands of Sri Lankans have taken to the streets of Colombo to protest the government’s response to the country’s worsening economic situation. On Saturday, protesters stormed President Rajapaksa’s residence and reportedly seized 17.8 million rupees (around $50,000), used the facilities and ate food in storage, according to Cointelegraph.
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