Sri Lanka: Unsafe Environment For Virtual Currency
Posted 12,April

By Chaveendra Dunuwille

In Local News

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Virtual Currency (VC) are identified as digital tokens created by private entities  and can be obtained through activities such as online mining, Initial Coin  Offerings (IPO’s) or through Virtual Currency Exchanges. When one associates  with VC’s the most well- known tokens include bitcoin, litecoin and etherum. 

Following an increase in inquiries regarding virtual currency exchanges in the  domestic and international market the Central Bank of Sri Lanka has issued a  statement highlighting the dangers of the use of VC’s in Sri Lanka.  

According to the statement issued investors are subject to a wide range of legal,  financial and logistical risks should they choose to operate virtual currency in  the island.  

The statement released goes on to highlight that the Foreign Exchange Act No.  12 of 2017 does not recognize virtual currency as a permitted investment  category in foreign exchange regulations. Electronic Fund Transfer Cards (EFTC)  such as credit cards and debit cards cannot be used to issue payments in foreign  currency in relation to virtual currency transactions. 

It must also be highlighted that the Central Bank itself does not issue any virtual  currency and it is not backed by any underlying assets. Furthermore the Central  Bank has not given license or authorization for any entity/company to operate  VC’s including crypto currency.  

The primary reason for which investors run the risk of violating foreign exchange  regulations with the purchase of virtual currency is attributed to the fact that  Sri Lanka at the present has no regulatory safeguards in place under its laws  and until new laws are introduced or the existing laws are amended investors  will continue to run risks in dealing with virtual currency.