CB issues fresh warning against usage of virtual currencies

The Central Bank of Sri Lanka (CBSL) today issued a fresh warning to those interested in investing in virtual currencies (VCs) stressing that currently there are no regulatory safeguards relating to the usage, investment or dealing in VCs in Sri Lanka.

In a notice educating the public on the risks in investing in VCs, the CBSL pointed out that dealing in these digital tokens poses a number of significant risks to the investor.

The risks include; users and investors having no regulatory or specific legal recourse in the event of any user or transaction related issues or disputes, making of large losses due to the high volatility, likelihood of VCs being associated in financing terrorist activities and used by criminals to launder criminal proceeds, and the likelihood of being associated with violation of Foreign Exchange Regulations as VCs are not identified as a permitted investment category in terms of the Foreign Exchange Act No. 12 of 2017 (FEA).

The notice, aimed at creating awareness, was issued due to the increase in recent inquiries on VC usage in the international and domestic markets.

Further, the CBSL stressed it 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.

VCs are digital tokens created by private entities that can be obtained online through mining, Initial Coin Offerings (ICOs) or through virtual currency exchanges. VCs are also commonly referred to as cryptocurrencies. Popular VCs include Bitcoin, Ethereum, Litecoin.