The Central Bank of Sri Lanka has declared cryptocurrencies illegal in the country, warning that their use is tied to fraud, money laundering, and financial instability.
Cryptocurrency, described by the Central Bank as a privately created virtual currency outside the control of any state authority, has been steadily gaining popularity as a speculative investment worldwide. These digital assets rely on cryptography and distributed ledger technologies, allowing online payments but not functioning as legal tender like physical money.
In Sri Lanka, however, regulators have taken a firm stand. The Central Bank has reiterated that cryptocurrencies are not recognized as legal currency and are considered an unregulated investment instrument. Without any protective framework in place, individuals who invest in these assets face the risk of severe losses. Numerous complaints have already been filed by Sri Lankans who lost large sums through cryptocurrency schemes, some of which were outright scams.
The Central Bank also highlighted that cryptocurrencies have increasingly been linked to fraudulent activities. Governor Dr. Nandalal Weerasinghe has repeatedly cautioned that crypto transactions in Sri Lanka are mostly associated with illegal uses, including money laundering and the transfer of funds outside official financial systems.
Globally, countries such as the United States, United Kingdom, and Japan have introduced regulatory measures to monitor and control cryptocurrencies, offering a level of investor protection. Sri Lanka, however, has chosen to prohibit their use entirely. Under the Foreign Exchange Act No. 12 of 2017, payments for cryptocurrency transactions using debit and credit cards are strictly banned.
The Central Bank warns that the use of digital assets brings no benefit to the Sri Lankan economy. Instead, it risks undermining the financial system and draining valuable foreign exchange reserves. Dr. Weerasinghe emphasized that the rupee remains the only legal currency of Sri Lanka and any attempt to use cryptocurrency is outside the law.
While the global debate on crypto regulation continues, Sri Lanka has drawn a clear line, categorizing cryptocurrency not only as illegal but also as a dangerous tool that could destabilize the nation’s fragile economy.
