The Central Bank of Sri Lanka (CBSL) has reaffirmed that virtual assets cannot be used for transactions between domestic residents, citing the critical need to safeguard national monetary sovereignty and protect the Sri Lankan rupee.

Speaking at the Sri Lanka FinTech Festival on Tuesday (03), CBSL Governor Dr. Nandalal Weerasinghe acknowledged the potential of digital finance while drawing a strict legal line regarding crypto asset usage.

"Emerging areas such as digital assets may also present opportunities, but they require clear regulatory frameworks, appropriate safeguards and careful consideration of their implications for the wider financial system," Weerasinghe stated. "Under the current legal framework in Sri Lanka, digital assets, also called virtual assets, cannot be used for payments between residents".

The Governor emphasized that maintaining this boundary is essential for the domestic economy. "This position is important in preventing the substitution of the Sri Lankan rupee in domestic transactions and in safeguarding the country's monetary sovereignty," he explained. He also cautioned that "certain digital assets may expose consumers to substantial volatility and facilitate illicit financial activity".

Looking forward, the central bank signaled that while regulations will adjust over time, currency protection remains paramount.

"As technology evolves, regulatory clarity must evolve with it, without undermining these essential objectives," Weerasinghe said. "Our approach must be proportionate, risk-based and forward-looking, providing clarity to responsible innovators while maintaining firm safeguards against unacceptable risks".