Sri Lanka’s Central Bank Keeps Crypto Illegal Amid Economic Collapse

The Central Bank of Sri Lanka (CBSL) has issued a cryptocurrency advisory reiterating its stance as the country’s economy continues to slump.

On July 12, the Central Bank of Sri Lanka issued a disclosure notice in light of “recent developments related to the use of virtual currencies”.

He described digital assets as “largely unregulated digital representations of value,” issued by private entities and negotiable.

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The CBSL reiterated its previous position in notifications in 2018 and 2021, saying it has not authorized or licensed any company that runs “schemes” with crypto assets. Therefore, crypto exchanges and difficult mining activities remain banned in the country.

No crypto entry for Sri Lanka

The central bank then reminded the public that under the Foreign Exchange Act 2017, electronic transfer cards (EFTC) such as debit or credit cards cannot be used for payments related to cryptocurrency transactions.

In other words, Sri Lankans are not allowed to use their bank cards to transact with crypto exchanges or companies.

The CBSL concluded that the crypto assets were “unregulated financial instruments” with no oversight or guarantees for use in the country. He completed the bulletin with a disguised warning to the public about the potential legal ramifications for meddling with digital assets.

“The public is therefore warned of the potential exposure to significant financial, functional, legal and security risks, as well as customer protection issues users experience from investing in VCs. [virtual currencies]†

The warning comes amid weeks of political and economic turmoil in Sri Lanka, which has seen tens of thousands of protesters take to the streets this week. Over the weekend, hundreds of protesters stormed the residence of Sri Lankan President Gotabaya Rajapaksa in Colombo, seized food supplies and claimed the building. On July 13, reports were released alleging that President Rajapaksa had fled the country for the Maldives hours before it aired.

The economic collapse

Inflation in the country is currently at a record high of 54.6% and household budgets have been stretched to a breaking point. The central bank has raised interest rates to 15.5%, meaning people’s savings are being decimated as their debt payments have increased.

In addition, the state imposed restrictions on fuel purchases, pushing 22 million people into the worst humanitarian crisis in 70 years. There are also food and medicine shortages in the country.

There couldn’t be a better time to give citizens access to crypto so they can hold stablecoins as a hedge against inflation, but the central bank has other ideas.

Similar protests against runaway inflation have taken place in Albania, Argentina, Panama, Kenya, Ghana, the Netherlands, Belgium, Italy and China.

Later in the day, the US was due to release its June CPI inflation data, which was expected to be worse than May at 8.8%.

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