Sri Lankan monetary authority cautions public against the use and investment of cryptocurrency due to high risks and financial scams.
The Central Bank of Sri Lanka (CBSL) has recently issued a warning to the public on the significant risks associated with using and investing in cryptocurrency. The CBSL reiterated to the public that cryptocurrencies are investment instruments that are not regulated and are not acknowledged as an asset class in Sri Lanka.
Heavy Losses and Financial Scams
The Sri Lankan monetary authority stated that it received complaints from members of the public who incurred heavy losses on their crypto investments and, in certain instances, were also subject to financial scams conducted through crypto-related schemes. The CBSL highlighted that these risks and concerns have already become a reality due to the recent failures of several global institutions involved in cryptocurrency
businesses, as well as the collapse and decline in value of certain cryptocurrencies.
Regulations on Electronic Fund Transfer Cards
On March 18, 2021, the CBSL issued a set of regulations restricting the use of Electronic Fund Transfer Cards (EFTCs), including debit and credit cards, for payments related to virtual currency transactions. According to the CBSL, cryptocurrency operates through informal channels, which do not contribute to the national economy and pose a threat of losing valuable foreign currency for the country.
Increasing Number of Financial Scams
Additionally, the central bank issued a warning to the public regarding the escalating number of financial scams offering high returns from cryptocurrency investments. The CBSL explained that these scams trick individuals into investing their money in cryptocurrency by promising a high return, as well as deceiving them to invest in fraudulent cryptocurrency projects. These types of scams bypass traditional regulatory and legal protection mechanisms, causing individuals to lose their hard-earned money.
Unauthorized Services and Advisory
Moreover, the CBSL emphasized that it has not provided authorization for any initial coin offerings (ICOs) or any of their variants, cryptocurrency mining operations, cryptocurrency exchanges, deposit-taking or custody services related to cryptocurrency, or any advisory services concerning cryptocurrency investment. The central bank strongly urged individuals involved in promoting or facilitating the promotion of cryptocurrency investment and trading to abstain from such activities. This was in view of the wide range of risks associated with cryptocurrency and the resulting negative effects on the public, including financial losses.
Conclusion
The CBSL warned the public about the significant risks associated with using and investing in cryptocurrency. The bank emphasized the need for individuals to exercise caution and take into account the potential risks involved in investing in unregulated investment instruments. The CBSL also reminded the public of its regulations restricting the use of Electronic Fund Transfer Cards for payments related to virtual currency transactions and urged individuals not to engage in activities that promote or facilitate investing and trading in cryptocurrency.
