The Central Bank of Sri Lanka (CBSL) has issued a warning to the public on the risks of using and investing in Cryptocurrency, also commonly referred to as “crypto”.
In a statement, the CBSL stated that, in light of recent public inquiries and developments involving cryptocurrencies, it desires to reiterate the significant risks connected with using and investing in cryptocurrencies.
A sort of virtual currency known as cryptocurrency is created by private organizations rather than a nation’s monetary authority. A digital representation of value that is applied using cryptography and Distributed Ledger Technology (DLT) or a comparable technology is referred to as “cryptocurrency.” It has been noted that some organizations actively promote cryptocurrency trading as a successful form of investment.
The public, however, has suffered significant losses on their cryptocurrency investments and, in some cases, has also been the target of financial scams carried out through crypto-related schemes, according to recent reports CBSL has received, the bank said.
The CBSL stated that it has already highlighted, through Press Releases issued in 2018, 2021, and 2022, the significant financial, operational, legal and security related risks as well as customer protection concerns posed to users of cryptocurrency. These risks and concerns have already materialised with the recent failures of various global institutions engaged in cryptocurrency businesses, and the collapse and loss of value of some cryptocurrencies. The public is reminded that cryptocurrencies are unregulated investment instruments which are not recognized as an asset-class in Sri Lanka. Further, cryptocurrencies are not considered as legal tender in Sri Lanka and have no regulatory safeguards relating to their usage in the country. As per the Directions No. 03 of 2021 under Foreign Exchange Act, No. 12 of 2017, Electronic Fund Transfer Cards (EFTCs) such as debit cards and credit cards are not permitted to be used for payments related to cryptocurrency transactions. Cryptocurrency operates through informal channels, and therefore, it does not contribute to the national economy and can also cause a loss of valuable foreign currency to the country.
The general public is also forewarned about the rise in financial fraud schemes offering high yields on cryptocurrency investments. These scams include misleading people into giving money by promising a high return on investment in cryptocurrencies, as well as misleading people into funding fraudulent coin projects. Such frauds get around conventional legal and regulatory safeguards, costing victims their hard-earned money, it continued.
The CBSL strongly advised the public not to invest in or participate in any cryptocurrency scheme provided through the Internet, other forms of media, or directly by any persons and to protect their hard-earned money. The general public is also informed that CBSL has not authorized any person or company to operate any cryptocurrency-related schemes, and that it has not authorized any Initial Coin Offerings (ICOs) or variations thereof, cryptocurrency mining operations, cryptocurrency exchanges, related deposit-taking or custody services, or associated cryptocurrency investment advisory services.
Given the numerous risks associated with cryptocurrencies and the hardships they can cause the public, including financial losses, the CBSL also encouraged those involved in promoting and helping to facilitate the promotion of cryptocurrency investing and trading to stop doing so.
