Sri Lanka is at a crucial juncture of potentially being sanctioned or blacklisted by the Financial Action Task Force (FATF) due to deficiencies in Anti Money Laundering (AML) and Countering Financing of Terrorism (CFT) measures, affecting international banking and foreign investment, a top official from the Central Bank of Sri Lanka told this week.
Dr. Subhani Keerthiratne, Director/Financial Intelligence Unit (FIU), Central Bank (CB) made these remarks during the monthly meeting of the Sunday Times Business Club (STBC) held at the Shangri-La Hotel in Colombo, on Tuesday. The title of the discussion was ‘Bitcoins and cryptocurrency – stable or risky?’
Providing an overview of Sri Lanka’s regulatory stance on virtual assets, AML and CFT, Dr. Keerthiratne stated, “Sri Lanka’s legal tender remains the ‘rupee’, and cryptocurrencies are not legally recognised. Cryptocurrency transactions are explicitly prohibited, with public warnings issued. Regulatory framework is under development, including amendments to laws and establishing oversight bodies. The country emphasises a risk-based approach, prioritising effective regulation of Virtual Asset Service Providers (VASPs).”
Sri Lanka is actively working to align its legal and institutional framework with international standards. The government is taking steps to legally classify and regulate VASPs. The upcoming third mutual evaluation will assess Sri Lanka’s AML/CFT effectiveness, especially concerning virtual assets. Close international cooperation remains essential for combating AML/CFT risks associated with virtual assets, she added.
She also mentioned that FATF has 40 recommendations, with Sri Lanka adhering to mutual evaluations via the Asia Pacific Group on Money Laundering. “Sri Lanka’s compliance is evolving, with particular focus on recommendation 15 regarding virtual assets. The risks and challenges of cryptocurrency include, anonymity, cross-border transactions, scams, rapid technological changes, and unregulated environments. The Central Bank Act 2023 now empowers to regulate virtual assets,” noted Dr. Keerthiratne.
The second speaker at the Sunday Times Business Club meeting was Savan Wijewardene, an entrepreneur and co-founder of Redhill, Singapore’s largest local public relations firm. He highlighted that the cryptocurrency and blockchain market capitalisation globally stands at approximately US$ 2-3 trillion in assets, with over 500 million owners worldwide and 200 million active traders. Despite crashes, the core blockchain technology remains stable and is growing rapidly.
“Many Sri Lankans, especially rural populations, use crypto for holding value, remittances, and online transactions. Several companies engage in crypto marketing, security, and remote jobs related to crypto. Despite low official regulation, widespread informal use suggests readiness for structured adoption,” noted Mr. Wijewardene while adding that Sri Lanka could explore regulatory frameworks to harness crypto’s potential while mitigating risks. Collaborations with countries like Dubai and Singapore may provide guidance. Encouraging local innovation and integration into the financial system could promote economic growth and financial inclusion.
He also highlighted that cryptocurrencies are a significant and rapidly evolving part of the global financial landscape with profound implications for emerging markets like Sri Lanka. The technology’s stability and growth indicate a future where digital assets may become central to finance, investment, and economic strategies.
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