The Central Bank Sounds the Alarm
The Central Bank of Sri Lanka (CBSL) recently made headlines with a stern warning to the public about the perils of engaging in cryptocurrency transactions. In a statement released on Tuesday, the bank highlighted the absence of any authorized entities in Sri Lanka providing crypto-related services. Yes, that means no exchanges, no initial coin offerings, and definitely no mining—essentially, no party on the crypto dance floor.
Understanding the Risks
According to the CBSL, virtual currencies are categorized as “unregulated financial instruments.” This designation comes with a plethora of risks, including financial losses and legal troubles. It’s a bit like walking through a dark alley, blindfolded; you might just trip over something that looks suspiciously like your savings.
What Does the CBSL Say?
The CBSL issued a warning in light of “recent developments” in the virtual currency market, referring to the wild market fluctuations that have rocked crypto prices (hello Bitcoin). They caution the public that investing in cryptocurrencies exposes individuals to numerous risks, including:
- Financial risks
- Operational risks
- Legal risks
- Security risks
In simpler terms, if you thought the stock market was a rollercoaster, crypto is the drop tower that goes straight down at breakneck speed.
Inflation and Protests Fueling the Fire
Coincidentally, this warning comes as Sri Lanka grapples with its inflation rate soaring above 54% back in June. The country is on track to become the heavyweight champion of inflation, with reports now suggesting rates hover around 45%. As a result, everyday essentials have become luxuries for the 22 million citizens struggling to make ends meet.
Revolution in the Streets
The rising cost of living has led to widespread protests, culminating in a dramatic scene last Saturday when hundreds of protestors stormed President Gotabaya Rajapaksa’s residence. Among the spoils? A modest sum of 17.8 million rupees (about $50,000), which they quite literally snatched from the Presidential cookie jar. While folks were at it, they utilized the amenities, had a feast from the food supply, and likely made some snazzy TikToks about it.
Conflicting Messages on Crypto
In a curious twist, while the CBSL has been issuing warnings about the dangers of cryptocurrency investments, it had previously dabbled in a blockchain project for Know Your Customer (KYC) frameworks. This initiative hints at the central bank’s acknowledgement that despite the risks, there’s something intriguing about blockchain technology. Meanwhile, some savvy Sri Lankans have resorted to stablecoins like USD Coin (USDC) as protective bubbles against soaring inflation and economic upheaval. The irony isn’t lost—risking it all on the thing the bank warns against, but hey, desperate times call for desperate measures.
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