Central Bank Warns of Cryptocurrency Risks, Unlicensed Exchanges

Sri Lanka’s central bank has warned of the risks associated with cryptocurrencies as interest and trading volumes in bitcoin and other cryptocurrencies increase both locally and globally.

Sri Lanka’s central bank warns against bitcoin

The Central Bank of Sri Lanka has issued an advisory on cryptocurrencies. In light of recent investigations into the use of virtual currencies in the international and domestic markets, the Central Bank of Sri Lanka (CBL) wishes to educate the public on the risks associated with investing in virtual currencies, the bank said in a statement issued Friday.

In describing what a cryptocurrency is, the central bank explained that virtual currencies (VCs) are also commonly called cryptocurrencies and mentioned that popular currencies include Bitcoin, Ethereum and Litecoin. Sri Lankan monetary authorities have issued a warning:

There are no legal safeguards in Sri Lanka regarding the use, investment or transaction of venture capital. There are therefore significant risks associated with investing in or using venture capital funds in Sri Lanka.

The central bank then highlighted some of the risks it believes are associated with cryptocurrencies. 1 : Users/Investors have no regulatory or specific recourse for problems or disputes relating to the User or the Transaction.

In addition, the central bank says cryptocurrencies are highly volatile because they rely on speculation and investors are likely to suffer significant losses. In addition, monetary authorities have argued that there is a high probability that NPAs are linked to terrorist financing and are used by criminals to launder the proceeds of crime.

The Central Bank of Sri Lanka has also reported a possible violation of foreign exchange laws. It explained in detail that since cryptocurrencies are traded as assets on exchanges, purchasing them from abroad would violate foreign exchange regulations as they are not categorized as permissible investments under the Foreign Exchange Act 12 of 2017 (FEA). In addition, there are electronic funds transfer cards (EFTCs), such as. B. Debit and credit cards may also not be used for foreign currency payments in connection with virtual currency transactions in the country. The Central Bank concluded:

The public is therefore made aware of the significant financial, operational, legal, customer protection and security risks that venture capital investments pose to users and the economy.

This is not the first time Sri Lanka’s central bank has warned people about the risks of cryptocurrencies. The bank also issued a warning about cryptocurrencies in April 2018.

The central bank also emphasized that it has not licensed organizations or companies to conduct venture capital programs, including cryptocurrencies, and has not authorized ICOs, mining operations, or virtual currency exchanges.

What do you think of the Central Bank of Sri Lanka’s warning? Let us know your comments in the section below.

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