Cryptocurrency, a digital currency that operates through an encryption algorithm, was warned by the Sri Lankan central bank with considering an illegal tender, and in accordance, there are no legal licenses or other authorizations for any entity in order to operate within Sri Lanka. Further, CBSL posted on their website “As per Directions No. 03 of 2021 under Foreign Exchange Act, No. 12 of 2017 issued by the Department of Foreign Exchange of CBSL, Electronic Fund Transfer Cards (EFTCs) such as debit cards and credit cards are not permitted to be used for payments related to virtual currency transactions, “It warned previously in 2018 and 2021 regarding this matter emphasizing that there are no authorized initial coin offerings (ICO) or mining operations and virtual currency exchanges within the country and in another hand Virtual currencies are considered “unregulated financial instruments and have no regulatory oversight or safeguards relating to their usage” within the nation. This warning emerged at a time when the domestic economy is considerably threatened by the sovereign-debt crisis. Sri Lanka fell into default in the month of May of this year and struggled to secure essential imports from other nations which leads to higher inflation year-on-year. This is a considerable fact when The total market value of final goods and services contracted by 1.6% in the first quarter of 2022 which was measured by GDP gross domestic product The falling value of local currencies due to the emerging economic crisis within the country leads people to more and more invest in Cryptocurrencies while the $2 trillion crypto market has dropped over 56% to $873.03 billion in value within a few months and this alternation is parallel to decline the privet and public markets deal flow activities. crypto started to take a place role in Srilanka with the emergence of the economic crisis while the rupee value is significantly decreasing comparatively to dollars because Sri Lanka’s economy has collapsed and is facing a currency substitution risk. The country’s political leadership is working to get a bailout from the International Monetary Fund. this is a considerably time-consuming process as a negative result of not preparing for an upcoming economic crisis.
Cryptocurrency in economic crisis
in another hand, when it considering the Sri Lankan economic crisis, The most enticing fact regarding the Sri Lankan economic crisis is how predictable it was. a majority of people pre-arranged solutions for this crisis while the Sri Lankan government neglected this deficit. According to Dhananath Fernando, COO of Advocate which is an economics-focused think-tank based in the capital Colombo, “Economists have been raising red flags on the debt crisis since 2020” In another hand “I began taking large rupee-denominated loans in 2021,” said Saliya Gunasinghe.“I work for a foreign firm and earn dollars. I was able to borrow in rupees at a reasonable interest rate. I took loans and bought real estate, anticipating a crash in the value of the rupee.” In other words, When he bought his property, the dollar was worth 200 Lankan rupees. Now it is close to 370.“My repayments, in dollar terms, have almost halved and I anticipate they will fall further. I might end up getting my apartment for virtually nothing,” Gunasinghe said.
By the end of 2020, many like Gunasinghe were preparing for the worst. For example, the cryptocurrency space generated a lot of interest.“People saw the central bank struggling to maintain an artificial currency peg. Many knew it would crash and started converting their cash savings to stable coins like USD-T,” according to Prashan Loganathan, an active cryptocurrency trader based in Negombo, a city on the western coast of the island nation.“Those who managed to convert at the rate offered a year ago are comfortable. Those who didn’t regret it.”
Sri Lankans who minimized the effect of the crisis
“I began taking large rupee-denominated loans in 2021,” said Saliya Gunasinghe. “I work for a foreign firm and earn dollars. I was able to borrow in rupees at a reasonable interest rate. I took loans and bought real estate, anticipating a crash in the value of the rupee. “the amazing fact is When he bought his property, the dollar was worth 200 Lankan rupees. Now it is close to 370.“My repayments, in dollar terms, have almost halved and I anticipate they will fall further. I might end up getting my apartment for virtually nothing,” Gunasinghe said. By the end of 2020, many like Gunasinghe were preparing for the worst while certain people neglected. according to prashan Loganathan, a cryptocurrency trader in Negombo Sri Lanka “People saw the central bank struggling to maintain an artificial currency peg. Many knew it would crash and started converting their cash savings to stable coins like USD-T,” according to saman, a black market operative, who now reveals his surname Commodities were another arena. In 2021, merchants began to hoard stuff like sugar, flour, and cooking gas cylinders. “We bought these cylinders for 2,500 (Lankan rupees), but we are selling for a 4x-5x profit,” Rosie Wijesinghe, A homemaker In Colpetty let her son persuade her into buying a power generator in 2021 by installing solar cells while there is a reliable power supply in the living area. this can consider a wise decision because of the 13 power outages in the month of march. However, for every household that was relatively prepared for the crisis, there were several that were not. It seems that the Sri Lankan government has been the worst.
An unprepared Sri Lankan government
Sri Lanka has fallen from a significant trade deficit for decades. As debt matured, debt service was expected to remain high in the years after 2020. In 2022, the government plans to repay an amount equal to 90% of its total budget expenditures. according to Umesh Moramudali, economist and lecturer at the University of Colombo. “The government refused to accept the reality of a default. Then went on to make a series of policy decisions that further exacerbated matters,” The result is that the reserves of state commodities like fuel, flour and coal are completely inadequate to meet the crisis. Negotiations with the IMF to restructure the country’s apparently unsustainable debt began too late. With no way to import goods anymore, upper-middle-income Sri Lanka is now dependent on handouts from its neighboring countries.
optimistic view vs crypto frauds
while Sri Lankan middle-income level people occur an optimistic view regarding the cryptocurrency trend that emerged during the economic deficit, there are several threats that should deeply consider. A Chinese couple was arrested regarding an Rs. 14 bil crypto fraud at Katunayake International Airport in Sri Lanka. According to the Police Spokesperson Attorney SSP Nihal Thalduwa, 8,000 Lankans were fooled by this Crypto deceit which was conducted together with a Sri Lankan person named Lamahewage Shamal Keerthi Bandara. The police spokesperson said that Lamahewage Shamal Keerthi Bandara started this fraud in 2020 from an office located in World Trade Center, Colombo promising them great returns for their crypto investments. However, he was released on bail after being presented to the court, the police media spokesperson said.
Cryptocurrency as a digital currency:
Cryptocurrency is a digital currency operated through encryption algorithms, an alternative form of payment that exists only electronically and which able to buy through a phone, computer, or a cryptocurrency ATM. Bitcoin can consider a well-known one creating numerous Cryptocurrencies around the world.
How do people use cryptocurrency?
There are various reasons behind using cryptocurrency including quick payments, avoiding transaction fees that traditional banks charge, and remaining holding cryptocurrency as an investment with the intent of value increasement.
How to buy cryptocurrency?
Cryptocurrency can able to buy through an exchange, an app, a website, or a cryptocurrency ATM while certain people buy it through a complex procedure named “mining “using advanced computer technology.
Where and how to store cryptocurrency?
Cryptocurrency can able to store in a digital wallet which consists of a wallet address online on a computer or an external hard drive. A wallet address is usually consisting of a long string of numbers and letters. The problem regarding this is if something happens to the digital wallet or crypto funds like being sent to the wrong person, losing the password, or the digital wallet being stolen or compromised, there is no party to respond to recover the funds.
How is cryptocurrency different from U.S. Dollars?
cryptocurrency merely exists digitally. therefore, it is different from traditional currency like U.S. Dollars. in another hand cryptocurrency is not promoted or insured by the government while no occur responsibility or obligation to hack cryptocurrency funds. The value of Cryptocurrency changes continuously and rapidly, even within one hour and the amount of the change can be significant which depends on various factors including supply and demand. Cryptocurrencies are more volatile than traditional investments like stocks and bonds. thousands of dollars worth of investment might decrease to hundreds and the dangerous fact is if the value decrease, there’s no guarantee it will increase again.
Paying With Cryptocurrency?
There are various ways to pay with Cryptocurrency and in another hand, it is certainly different from paying with a credit card or other traditional payment methods because it’s not protected by legal bodies like credit cards or debit cards. The considerable fact in Cryptocurrency payments, it’s not reversible or refundable. Therefore, assurance built through research regarding the seller’s reputation plays a major role when it comes to Cryptocurrency payments. Some information about your transactions may be public. The Majority of people exchange ideas regarding cryptocurrency transactions as anonymous But the fact is Cryptocurrency security is certainly different than it because the transactions are recorded on a public ledger or a public list, named a “blockchain. “and it might consist of pieces of information including transaction amount, as well as the sender’s and recipient’s wallet addresses. This information can be able to use To identify the people involved in a specific transaction.
How To Avoid Cryptocurrency Scams?
Scammers are always seeking a way to steal money using cryptocurrency. To prevent cheating from a crypto con, certain practices should implement. The most important fact is, merely scammers demand payment in cryptocurrency. In another hand, no legitimate business will ask you to send cryptocurrency in advance and Only scammers will guarantee profits or big returns. The majority of deals emerging during dating sites or app is a scam and some of them use tried-and-true scam tactics including Investment scams, impersonating businesses, government agencies, and love interests. Investment scams often promise to “make lots of money” with “zero risk, “which might start from social media or online dating apps or sites, text, email, or call. Crypto can be involved in Investment scams in two ways as investment and payment.
