The Cabinet of Ministers has approved the introduction of a legal framework to regulate virtual assets and virtual asset service providers in Sri Lanka, amid concerns over the risks posed by unregulated digital asset transactions.

At present, Sri Lankan users can access and trade virtual assets, including cryptocurrencies, through offshore exchanges and peer-to-peer transactions conducted via informal online platforms.

The Government said these digital assets, which can be electronically traded or transferred and are used for payment and investment purposes, are currently operating outside Sri Lanka’s regulatory framework. As a result, virtual asset service providers are able to function without registration requirements, compliance obligations, reporting standards, or regulatory supervision.

Highlighting the potential risks of financial crimes within the country’s financial system, the Government said there is a need to establish a regulatory framework and a dedicated regulatory authority to oversee virtual assets and virtual asset service providers.

Under the policy direction of the National Coordinating Committee on Anti-Money Laundering and Countering the Financing of Terrorism, a subcommittee headed by the Deputy Digital Economy Minister and comprising relevant officials was appointed to identify a suitable regulatory framework and implementation plan for the sector.

The subcommittee recommended designating the Securities and Exchange Commission (SEC) as the regulatory authority for virtual assets and virtual asset service providers, with supervision coordinated through a structure involving the Central Bank, the Financial Intelligence Unit, and the Inland Revenue Department.

Taking these recommendations into consideration, the Cabinet approved a proposal presented by President Anura Kumara Dissanayake, in his capacity as Digital Economy Minister, to introduce the necessary legal provisions to regulate virtual assets and virtual asset service providers in Sri Lanka.