Sri Lanka’s central bank is repeating crypto warning after protesters seized the president’s residence

by · July 12, 2022

In the midst of economic and political unrest, the Central Bank of Sri Lanka, or CBSL, has warned the public against buying cryptocurrencies due to the lack of regulatory oversight.

In a Tuesday report, CBSL said it has not authorized or licensed any company in Sri Lanka to offer crypto-related services, including exchanges, initial coin offerings and mining. The central bank said the warning was a response to “recent developments in the use of virtual currency”, probably with reference to the market downturn and significant volatility in the prices of cryptocurrencies such as Bitcoin (BTC).

Virtual currencies “… are considered unregulated financial instruments and have no regulatory oversight or security measures related to their use in Sri Lanka,” CBSL said. “The public is therefore warned of possible exposure to significant financial, operational, legal and security risks as well as customer protection concerns posed by users of investments in VCs.”

The announcement came in the middle of inflation in Sri Lanka, which reached more than 54% in June when the SBSL bank raised the interest rate to 15.5%. According to data from the central bank, inflation is around 45% at the time of publication, which affects the cost of living for the 22 million people living in Sri Lanka.

On Saturday, hundreds of protesters stormed Sri Lankan President Gotabaya Rajapaksa’s residence in Colombo, seizing 17.8 million rupees – about $ 50,000 at the time of publication – in addition to taking control of the building, using the facilities and eating food in stock. Thousands of Sri Lankans have also taken to the streets of the capital in protest of the government’s response to the economic situation. Parliament Speaker Mahinda Yapa Abeywardena said Rajapaksa would resign on Wednesday.

Related: Sri Lanka appoints a committee to implement crypto mining and blockchain

Despite the publicly issued warnings about crypto, Sri Lanka’s central bank has previously helped develop a Know Your Customer proof-of-concept project as part of a government initiative aimed at exploring the use of blockchain and crypto mining. Some social media users who claim to be in Sri Lanka have too so they will keep stable coins like USD Coin (USDC) as a hedge against the country’s high inflation and bankruptcy.