The central bank of Sri Lanka has issued an alert about the dangers of cryptocurrencies.

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The Central Bank of Sri Lanka (CBSL) has warned its residents to avoid cryptocurrency investments. The CBSL highlighted a number of practises that could endanger investors in a public notice issued on April 9, 2020. The highlighted activities included ICO acquisitions, trading on cryptocurrency markets, and cryptocurrency mining.

The central bank issued such a statement due to the lack of a solid crypto-regulatory system in Sri Lanka.

The CBSL informed retail investors about the crypto ecosystem’s high volatility. As previously said, this aspect has the potential to expose investors to substantial financial losses.

The bank then voiced its worry over cryptocurrencies being associated with money laundering, terrorist financing, and other related illegal activity, as well as emphasised the lack of a concrete regulatory resort, which will make investors feel handicapped during conflicts.

The CBSL said,

“The public is therefore warned of the significant financial, operational, legal, customer protection and security related risks posed by investments in VCs to the users as well as to the economy.”

Pointing out the legality, it further clarified,

“The public is also informed that 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 ICOs, mining operations or Virtual Currency Exchanges.”

Despite the fact that this notification has been released, it should be noted that the central bank has already begun testing the crypto waters through its national programme.

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The bank also drew attention to Sri Lanka’s Foreign Exchange Regulations. According to their Foreign Exchange Act, Virtual Currencies (VCs) are not listed as a permanent investment group.

 

It also said,

“Electronic Fund Transfer Cards (EFTCs) such as debit cards 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.”

 

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