Central Bank launches survey on Crypto or virtual assets service providers

Both persons and entities engaged in virtual asset service providing activities are required to take part in the survey which can be accessed online via:

https://fiusrilanka.gov.lk/fiu_vasp_form.html.

In a step toward registering the Crypto currency (Crypto) or Virtual Assets Service Providers (VASPs) with the Financial Intelligence Unit (FIU), the Central Bank has commenced a mandatory survey to obtain their information.

Launching the survey, the Central Bank listed down who could be considered as VASPs in Sri Lanka.

Questions popped up recently over the legality of crypto or virtual assets both as a mode of payment and also an asset class after many merchants made public that they accept payments via Crypto while thousands of others got into investing in virtual assets such as Bitcoin. According to the Central Bank, a VASP is considered to be a party engaged in exchange of virtual assets with fiat currencies or exchange of one or more forms of virtual assets or a party engaged in transferring of virtual assets. Further, a virtual asset service provider is also considered as any party who engages in safekeeping and/or administration of virtual assets or instruments enabling control over them.

Besides, VASP is also considered a party who participates in and provision of financial services related to an issuer’s offer and/or sale of a virtual asset. However the Central Bank made clear that the virtual assets do not include digital representations of fiat currencies issued by a Central Bank.

“Virtual assets are digital representations of value such as crypto currencies that can be digitally traded and used for payment or investment purposes”, the Central Bank said inviting those who are engaged in these virtual assets to participate in the survey. The survey to gather information on who are engaged in Crypto appears to be the first in a series of steps to register them with the FIU of the Central Bank as they recently said the rules are being drafted to bring Crypto and other VASPs under the FIU.

Once registered, they will continue to have to report their transactions with the FIU to ensure that these currencies are not used for any form of money laundering.

Crypto or virtual assets are completely prohibited in Sri Lanka for payments. Investing in them as an asset class gains in popularity although the Central Bank warns against it due to its extreme price volatility.

Currently there is no legislation in Sri Lanka governing Crypto or virtual assets. The effort by the Central Bank to gather information and subsequently register the VASPs with the FIU, requiring them to report to the FIU is not a regulatory function but only a requirement under the periodic evaluations under the Anti-Money Laundering & Countering the Financing of Terrorism which is set up to combat money laundering, financing of terrorism and related crimes in Sri Lanka in line with the international standards and best practices.