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SriLanka central bank issues crypto warning following economic crises

13-Jul-2022 By: Shikha Jha
SriLanka central ban

Sri Lanka's central bank issues a fresh crypto warning

 following economic and political crises

The Central Bank of Sri Lanka, or CBSL, has cautioned the public against buying cryptocurrencies due to a lack of regulatory monitoring during a time of economic and political unrest.

The CBSL stated in a warning on Tuesday that it has not given any companies in Sri Lanka permission or a licence to provide services related to cryptocurrencies, such as exchanges, initial coin offerings, and mining. The warning was issued in response to recent developments regarding the use of virtual currencies, most likely alluding to the current market slump and extreme volatility in the pricing of cryptocurrencies like Bitcoin (BTC).

According to the CBSL, “virtual currencies are recognised as unregulated financial services, and their use in Sri Lanka is not subject to regulatory control or protections. As a result, the general public is cautioned about the potential exposure to major financial, operational, legal, and security-related risks as well as user concerns over customer protection posed by investments in VCs.”

The statement was made after the SBSL bank increased interest rates to 15.5 percent and Sri Lanka's inflation rate exceeded 54 percent in June. Inflation in Sri Lanka, where 22 million people reside, is currently estimated by the central bank to be over 45% at the time of publication.

Sri Lanka's central bank assisted in the creation of a Know Your Customer proof-of-concept project as part of a government initiative to investigate the use of blockchain and cryptocurrency mining, despite publicly issuing cautions about cryptocurrencies. 

Additionally, several social media users claiming to be from Sri Lanka stated that they would hold stablecoins like USD Coin (USDC) as a safeguard against the nation's excessive inflation and impending insolvency.

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