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CB cautions against the use of virtual currencies in Sri Lanka

16 April 2018 - 116   - 0


Sri Lanka’s Central Bank (CB) on Monday alerted the public to the dangers of dabbling in cryptocurrencies which it said “may pose significant risks in terms of financial, operational, legal, customer protection and security related risks to their users as well as to the economy”.
In a public announcement, the CB – wading into these ‘new currencies’ long after it has been in ‘circulation’ – said that it has not given a licence or authorization to any entity or company to operate schemes involving virtual currencies, including cryptocurrencies, and has not authorized any Initial Coin Offerings (ICOs).
The statement, which opens saying “the CB is aware of the growing interest in virtual currencies (VCs), both domestically and internationally”, noted that the term “virtual currencies” is commonly used to refer to digitally created representations of value that are issued by private developers and denominated in their own unit of account. 
The statement added:
“Common examples of virtual currencies are cryptocurrencies such as Bitcoin, Litecoin and Ethereum. Virtual currencies are not central bank issued currency.
Virtual currencies such as cryptocurrencies use decentralised peer-to-peer digital networks to authorize transactions. Due to the absence of a centralized authority such as a Central Bank to guarantee the value of the currency and regulate transactions, there is no recourse in the event of any user or transaction related issues or disputes.
The value of virtual currencies is dependent on speculation and is not backed by an underlying asset or a regulatory framework. Due to this, virtual currencies may demonstrate major volatility. Similarly, there appears to be a high probability of virtual currencies being used in illegal activities. Further, though unintentional, their usage could amount to breaches of anti-money laundering and combating the financing of terrorism (AML/CFT) laws.” 

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