The Central Bank of Sri Lanka has issued a warning about the risks associated with cryptocurrency as the interest rates and trading volume of Bitcoin and other cryptocurrencies increase locally and globally.
The Central Bank of Sri Lanka warns against Bitcoin
The Central Bank of Sri Lanka has published a notice regarding the cryptocurrency. “In light of recent research into the use of virtual currencies in the international and domestic markets, the Central Bank of Sri Lanka (CBSL) would like to inform the public about the risks associated with investing in virtual currencies,” said the statement released on Friday .
When describing the cryptocurrency, the central bank stated that virtual currencies (VCs) “are also commonly referred to as cryptocurrencies,” and noted that popular currencies are Bitcoin, Ethereum and Litecoin. The Sri Lankan Monetary Authority warned:
There are no regulatory guarantees regarding the use, investment, or trading of VCs in Sri Lanka. Investing or using VCs in Sri Lanka therefore carries significant risks.
The central bank then highlighted some of the risks it believes are associated with cryptocurrencies. The first is that “Users / Investors have no regulatory or specific remedy in the event of any problem or dispute related to any user or transaction.”
Next, the central bank says that cryptocurrencies are very volatile “because they depend on speculation” and that investors “are at risk of making big losses”. In addition, the monetary authority claimed that “there is a high likelihood that VCs will be implicated in terrorist financing and used by criminals to launder the proceeds of crime”.
The Sri Lankan Central Bank also pointed to the possible “foreign exchange violation”. Since cryptocurrencies are traded as assets on stock exchanges, buying from abroad would lead to a violation of the foreign exchange regulations, as they are not shown as a permissible investment category within the meaning of the Foreign Exchange Act No. 12 of 2017 (FEA). In addition, electronic transfer cards (EFTCs) such as debit cards and credit cards may not be used to make foreign currency payments in connection with virtual currency transactions in the country. The central bank concluded:
The public is therefore warned of the significant financial, operational, legal, customer protection and security risks that investment in VCs poses to both users and business.
This is not the first time the Central Bank of Sri Lanka has warned people about the risks associated with cryptocurrencies. The bank also published a crypto warning in April 2018.
The central bank also stressed that it “has not licensed or approved any company or company to operate systems using VCs, including cryptocurrencies, and has not approved any ICOs, mining operations or virtual currency exchange.”
What do you think of the warning from the Central Bank of Sri Lanka? Let us know in the comments below.
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