The Death of Currency And The Rise Of Cryptocurrencies In Sri Lanka

July 23, 2022

Darko Simunovski content is written in English. Translations into other languages are automated and there may be minor text errors.

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Ahead of the November 2019 election, Sri Lankan presidential challenger Gotabaya Rajapaksa proposed sweeping tax cuts so recklessly, so the incumbent government reduced the value-added tax to 8% from 15% and scraped other levies. Sri Lanka collected relatively less revenue than nearly any other country, and its high debt load had forced them to seek loan from the International Monetary Fund.

The new Prime Minister Ranil Wickremesinghe in the beginning of this month said:

“Sri Lanka is bankrupt, as the country suffers its worst financial crisis in decades, leaving millions struggling to buy food, medicine and fuel”

After Rajapaksa won 2019 elections and implemented mix of sweeping tax cuts and many bad policies, with support of Sri Lanka’s Central Bank. This was devastating for the country and have drained the nation’s cash reserves, although Sri Lanka’s central bank is responsible for the crash of the economy and destroying the livelihoods of the people, last week they issued a warning regarding the use of cryptocurrencies.

The central bank admitted the devastating economic and political crisis, they have also stressed out that have not given any license or authorization to any entity or company to operate schemes involving cryptocurrencies. The Central Bank of Sri Lanka (CBSL) published a notice about cryptocurrency titled “Public Awareness in Relation to the Use of Virtual Currencies in Sri Lanka.”

It’s ironic to see the same institution that’s responsible for hyperinflation destroying the country’s economy, warning about cryptocurrencies. They have also noted that they have not authorized any initial coin offerings (ICO), mining operations or virtual currency exchanges and warned for (EFTCs) such as debit cards or credit cards that are not permitted to be used for payments related to virtual currency transactions. Cryptos are considered as unregulated financial assets and have no regulatory oversight or safeguards relating to their usage in Sri Lanka, despite the economic collapse.

It is obvious that more and more people are trading cryptocurrencies, as it’s the best way to hedge against the worst economic crises in the history of the country, but the Central Bank of Sri Lanka is more concerned for losing its power and influence, rather than the living standard of its people. Financial crisis triggers unrest in the country protesters entered the President’s House which was Rajapaksa’s office and residence in the commercial capital.

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