Although the Sri Lankan Rupee (LKR) remains the country’s only recognised legal tender under the Central Bank of Sri Lanka Act, No. 16 of 2023, profits earned through cryptocurrency transactions will now be subject to income tax as “other income,” Deputy Minister of Finance and Planning Dr. Anil Jayantha Fernando informed Parliament.
Responding to questions raised by MP Ravi Karunanayake, the Deputy Minister said the Inland Revenue Department (IRD) will classify profits generated from cryptocurrency trading, virtual asset transactions and related activities under the “other income” category for income tax purposes.
Dr. Fernando reiterated that cryptocurrencies are not recognised as legal tender in Sri Lanka and cannot be used for commercial payments or settlements within the country’s formal financial system.
He further explained that cryptocurrencies are not regulated in Sri Lanka as an asset class or financial instrument. The Central Bank of Sri Lanka (CBSL) has not licensed or authorised any cryptocurrency exchanges, digital asset trading platforms, mining operations or related service providers to operate in the country.
As a result, cryptocurrency trading activities remain outside the regulated financial system, and individuals investing in digital assets do so entirely at their own risk, he said.
The Deputy Minister noted that the Central Bank has consistently warned the public since 2018 that cryptocurrencies are not recognised as legal tender in Sri Lanka.
He also confirmed that existing regulations do not recognise cryptocurrency or other virtual asset investments and that Sri Lankan resident cardholders are prohibited from making international foreign exchange payments to purchase or trade virtual currencies.
Dr. Fernando emphasised that, under the current regulatory framework, Sri Lanka’s formal financial system cannot be used to facilitate cryptocurrency-related transactions, despite income earned from such activities now being subject to taxation under the Inland Revenue Department’s provisions.