Bitcoin – CB’s clarity in the making
Internal discussions at the Central Bank (CB) on cryptocurrency trading in Sri Lanka have taken a serious turn after an alarming rise in Bitcoin trading.
The Business Times learns that there are at least three different Internet platforms that allow buying and selling Bitcoin, a type of cryptocurrency
The latest data shows that one such Bitcoin trading platform, Paxful has since January till March surpassed the total volume traded last year. This is mainly owing to those with cash and nothing to do (during the pandemic).
So far CB's laws are dubious on cryptocurrencies. CB has not provided a – yay or nay – for license or authorisation to any entity for Bitcoin trading but it has to decide as it is becoming ‘contagious’. While the CB hasn't 'banned' Bitcoin there's a ban on local rupees leaving the country. “Without any regulation, investors may not get their money back in the event of a scam etc,” a CB source told the Business Times.
CB may get the Attorney’s General (AG) Department to mine the legality in peer-to-peer (P2P) crypto trading, which is the commonest Bitcoin trading, according to AG’s Department sources.
Twice in the past three years, the regulator has ‘warned’ the public saying that it hasn't licensed or authorised any entity to operate schemes on virtual currencies, including cryptographical functions to do transactions, and hasn't authorised Initial Coin Offerings (ICO) which are the cryptocurrency industry’s equivalent to an initial public offering (IPO).
The first came out in 2018 and the second last month saying there aren’t any regulatory safeguards relating to the usage, investment or dealing in (virtual currencies) in Sri Lanka.
“Therefore, investing or using (virtual currencies) in Sri Lanka poses significant risks,” it said. “The public is, therefore, warned of the significant financial, operational, legal, customer protection and security-related risks posed by investments in virtual currencies (VCs) to the users as well as to the economy. The public is also informed that CB has not given any license or authorisation to any entity or company to operate schemes involving VCs, including cryptocurrencies, and has not authorised any ICOs, mining operations or Virtual Currency Exchanges.”
However, CB in its roadmap in 2019 said the rising demand for digitalised financial services has created an opportunity for Sri Lanka to evaluate the possibility of adopting Blockchan Technology accepted as a secure database technology that is the backbone for virtual currencies but also a system that experts say could revolutionise international transactions.
Neighbouring India has proposed one of the strictest policies against cryptocurrencies while building a structure for an official digital currency. India would be the first major economy to make holding cryptocurrency illegal, if it makes the law. China, which has banned mining and trading, does not penalise possession.