LNP – CB asks users to assume risks when dealing in cryptocurrencies

Setting the record straight on the rising use of virtual currencies, which are also known as cryptocurrencies, the Central Bank said that the users ought to assume the risks associated in dealing with such currencies, as there is neither regulatory oversight nor any legal recourse should they fall victim by engaging with such currencies.

To make the public aware of the risks, the Central Bank in April issued a press communiqué listing down the significant and multiple risks associated with dealing in cryptocurrencies such as Bitcoin, Ethereum and Litecoin. As of late, some local merchants however announced either they had already started accepting or they were planning to accept cryptocurrency for their transactions,

which has led the public to believe that cryptocurrency has the legal backing in Sri Lanka. “Our policy on cryptocurrency hasn’t changed. We are still on the same policy. If certain sections conduct their businesses via cryptocurrency, they must also take the risks associated with it,” said Central Bank Governor Ajith Nivard Cabraal. In April, the Central Bank warned of the possibility of incurring heavy losses by holding such currencies, as their values are so dependent on speculation and aren’t generally backed by underlying assets. The Central Bank also cited that such virtual currencies have a high likelihood of being associated with terrorist financing activities and also could violate the foreign exchange regulations of the country. Speaking on the matter, Central Bank Deputy Governor Yvette Fernando said while they have been informed of some cases of cryptocurrency usage, there aren’t specific laws governing the usage of cryptocurrency at present.

“But we have informed the public about the dangers of using that kind of currency. People who engage in these will have to bear risk on that,” she added. After receiving the Cabinet nod early this month, a committee was set up comprising of professionals from both the public and private sectors to study and draft a report outlining the modalities, including the legal framework, to attract investments from companies engaging in cryptocurrency.

While a handful of countries such as El Salvador and Ukraine have legalised the use of cryptocurrencies, larger economies such as China recently clamped down on them, declaring all cryptocurrency transactions illegal while India has already announced plans to walk on the same path.

In a recent interview, Ray Dalio, Founder of Bridgewater Associates, a United Stated-based asset management company with multi-billion dollars worth of assets under management, said the governments don’t want cryptocurrency to succeed as they would eventually “kill it” either through regulation or other means