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Sri Lankan Central Bank Warns Against Crypto Amid Economic Crisis



Sri Lankan Central Bank Warns Against Crypto Amid Economic Crisis

The Central Bank of Sri Lanka, or CBSL, has warned the public not to buy cryptocurrencies due to a lack of regulatory oversight at a time of economic and political turmoil.

Sri Lanka maintains its position “Crypto is illegal”

The Central Bank of Sri Lanka issued a public awareness notice on July 12 in response to “recent developments regarding the use of virtual currency.”

Digital assets have been defined as “largely unregulated digital representations of value” that are traded and issued by private companies.

The CBSL reiterated its previous position in notices published in 2018 and 2021, saying that it did not authorize or license any company running “systems” using cryptocurrency assets. As a result, mining operations and cryptocurrency exchanges are still prohibited in this unstable country.

CBSL said,

“Virtual currencies… are considered unregulated financial instruments and are not subject to any regulatory oversight or safeguards related to their use in Sri Lanka. Therefore, the public is cautioned against potential exposure to significant financial, operational, legal, and security risks, as well as client protection issues that venture capital investments pose to users.

The central bank reminded the public that payments for cryptocurrency transactions cannot be made using electronic money transfer cards (EFTCs), such as debit or credit cards, in accordance with the Foreign Exchange Act of 2017.

In other words, Sri Lankans are prohibited from making purchases with their bank cards on cryptocurrency exchanges.

Related Reading | Cryptocurrency is worthless, says European Central Bank president

a country in chaos

Tens of thousands of protesters have flooded the streets of Sri Lanka this week after weeks of political and economic instability. Hundreds of protesters stormed the Gotabaya Rajapaksa mansion in Colombo over the weekend, stealing food and seizing the structure.

According to the sources, President Rajapaksa apparently fled the country for the Maldives just hours before resigning.

BTC/USD is trading above $20,000. Source: Trade View

The country’s inflation rate is at an all-time high of 54.6% and household budgets are already under pressure. The central bank has raised interest rates to 15.5%, which means that while debt payments have risen dramatically, people’s savings are running out.

In addition, the government imposed limits on the purchase of fuel, throwing 22 million people into the biggest humanitarian catastrophe in 70 years. There are food and medicine shortages throughout the country.

Sri Lanka’s economy collapsed. According to the Prime Minister, the country is bankrupt due to a foreign debt of 50 billion dollars. There is no fuel, food is running out and the country is facing a humanitarian crisis.
Sri Lanka needs a crypto lifeboat ASAP. #economy #news

— Ioan Munteanu (@MunteanuIoan13) July 12, 2022

The opportunity to introduce bitcoin to the general public and enable them to purchase stablecoins as an inflation hedge has never been greater. Unfortunately, the monetary authority has other ideas.

Related Reading | The Central Bank of Taiwan considers NFTs to be inappropriate and warns the general public to stay away

Featured image from iStock Photo, chart from TradingView.com

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