By: Staff Writer
October 20, Colombo (LNW): A quiet financial revolution is unfolding in Sri Lanka. As the rupee weakens and inflation erodes savings, thousands of citizens from tech-savvy youth to small business owners — are increasingly turning to cryptocurrency as an alternative store of value. What began as a niche experiment has grown into a widespread movement taking place largely beyond the reach of the country’s financial regulators.
A recent South Asian Journal of Finance study estimates that more than 320,000 Sri Lankans currently hold some form of cryptocurrency. International data provider Datawallet projects this figure could exceed 1.16 million by 2026, suggesting that crypto adoption could rival that of regional peers.
For many, digital assets like Bitcoin and Ethereum are seen less as speculative plays and more as protection against inflation and rupee depreciation. “Young professionals and small investors are quietly moving into crypto to preserve value,” said a Colombo-based financial analyst. “It’s happening under the radar outside banks and the stock market — but the momentum is real.”
Despite this surge, crypto trading in Sri Lanka remains legally unregulated. The country has yet to license any local exchanges, forcing most transactions onto offshore platforms or peer-to-peer networks, where oversight is minimal. This leaves investors exposed to fraud, hacking, and market manipulation without any legal protection.
The Central Bank of Sri Lanka (CBSL) has repeatedly cautioned the public about the risks of virtual currencies. Governor Dr. Nandalal Weerasinghe reaffirmed that the Sri Lankan rupee remains the only legal tender, warning that crypto investments are neither regulated nor guaranteed. “We are not banning crypto holdings,” he clarified, “but no one should believe crypto is a safe investment. Transparency and oversight are critical.”
In an effort to close the regulatory gap, the CBSL has proposed amendments to the Financial Transactions Reporting Act (FTRA). The changes would require Virtual Asset Service Providers (VASPs) to register with the Financial Intelligence Unit (FIU), bringing them under anti-money laundering and counter-terrorism financing (AML/CFT) supervision. Once enacted, the rules would force crypto intermediaries to report suspicious or large-value transactions, similar to banks and finance companies.
Meanwhile, the global crypto market continues to soar. Bitcoin recently crossed US$109,000, up more than 60% since late 2024, driven by U.S. regulatory reforms and institutional buying. Analysts predict it could hit US$150,000 by 2025, drawing even more attention from Sri Lankan investors seeking quick returns.
However, legal experts warn that without local regulation, the risks far outweigh the rewards. “If your crypto vanishes from an offshore exchange, there is no legal remedy in Sri Lanka,” said a financial lawyer.
As economic pressures mount, crypto’s rise reflects the public’s search for financial autonomy. Whether Sri Lanka integrates digital assets into its formal economy or continues to let them thrive in the shadows will determine if this digital boom becomes a success story or a cautionary tale.
