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Central Bank of Sri Lanka releases statement for Public awareness on Risks in investing in Virtual Currencies

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Considering the recent inquiries on virtual currency usage in the international and domestic markets, the Central Bank of Sri Lanka (CBSL) wishes to inform the public of the risks associated with investing in Virtual Currencies. “Virtual Currencies (VCs)” are digital tokens created by private entities that can be obtained online through mining, Initial Coin Offerings (ICOs) or through Virtual Currency Exchanges. VCs are also commonly referred to as cryptocurrencies. Popular VCs include Bitcoin, Ethereum, Litecoin. While VCs have their own value denominations such as bitcoins for Bitcoin and ethers for Ethereum, they are usually valued in VC Exchanges in currencies issued by Central Banks, e.g., US dollar (USD), Japanese Yen, etc. However, it is important to note that VCs are not issued by Central Banks and are also not generally backed by underlying assets. Therefore, their values are determined by speculation of the public on VC Exchanges. 

There are no regulatory safeguards relating to the usage, investment or dealing in VCs in Sri Lanka. Therefore, investing or using VCs in Sri Lanka poses significant risks such as;

  1. Users/investors will have no regulatory or specific legal recourse in the event of any user or transaction related issues or disputes.
  2. High volatility of the value of the VCs, as it is dependent on speculation, exposing the investment of VCs to a risk of making large losses.
  3. High Likelihood of VCs being associated in financing terrorist activities and used by criminals to launder criminal proceeds.  
  4. Violation of Foreign Exchange Regulations. As VCs are traded as assets in Exchanges, purchasing VCs from abroad would lead to a violation of Foreign Exchange Regulations, as VCs are not identified as a permitted investment category in terms of the Foreign Exchange Act No. 12 of 2017 (FEA). Electronic Fund Transfer Cards (EFTCs) such as debit cards and credit cards are also not permitted to be used for payments in foreign currency related to virtual currency transactions, in terms of the Foreign Exchange Regulations in Sri Lanka.

The public is therefore warned of the significant financial, operational, legal, customer protection and security related risks posed by investments in VCs to the users as well as to the economy. The public is also informed that CBSL has not given any license or authorization to any entity or company to operate schemes involving VCs, including cryptocurrencies, and has not authorized any ICOs, mining operations or Virtual Currency Exchanges. 

Source: CBSL

Business

Upbit crypto exchange receives suspension notice in South Korea

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South Korea’s Financial Intelligence Unit (FIU) has issued a suspension notice to Upbit, one of the nation’s leading cryptocurrency exchanges, citing alleged violations of Know Your Customer (KYC) protocols. The FIU’s investigation reportedly uncovered between 500,000 to 600,000 instances where Upbit failed to adhere to KYC procedures, potentially exposing the platform to significant fines.

Under South Korean law, each KYC violation can result in a penalty of up to 100 million Korean won (approximately $68,600). Given the volume of alleged breaches, Upbit could face fines totaling up to $34.3 billion. Additionally, the FIU has accused Upbit of engaging in transactions with unregistered cryptocurrency service providers, further compounding its regulatory challenges.

The suspension notice proposes a six-month halt on new user registrations, though existing users would remain unaffected. Upbit has until January 20 to respond to the FIU’s findings, with a final decision on the suspension expected by January 21. This development comes shortly after Upbit’s business license renewal in October 2024, which is now under regulatory review.

Upbit’s situation mirrors broader regulatory scrutiny in South Korea’s cryptocurrency sector. Recently, Lee Jung-hoon, former chair of major exchange Bithumb, was acquitted in an appeal trial related to a significant 2017 data breach. These events underscore the increasing regulatory pressures faced by cryptocurrency exchanges in the country.

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SEC under Trump could freeze crypto cases not involving fraud

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The U.S. Securities and Exchange Commission (SEC) is poised for a significant shift in its approach to cryptocurrency regulation under President-elect Donald Trump’s administration. With SEC Chair Gary Gensler and Commissioner Jaime Lizárraga set to resign on January 20, 2025, Republican Commissioners Hester Peirce and Mark Uyeda are expected to assume a majority position. This change could lead to a reevaluation of the SEC’s stance on digital assets, particularly concerning enforcement actions that do not involve fraud allegations.

Under Gensler’s leadership, the SEC pursued numerous enforcement actions against crypto firms, including high-profile cases against Coinbase, Binance, and Ripple Labs, alleging violations of securities laws. The incoming administration, however, has signaled a more crypto-friendly approach. Paul Atkins, President-elect Trump’s nominee for SEC Chair, is anticipated to initiate an overhaul of the agency’s cryptocurrency policies, potentially freezing or withdrawing ongoing enforcement cases that lack fraud allegations.

This prospective policy shift has generated optimism within the cryptocurrency community, which has often criticized the SEC’s previous regulatory approach as overly aggressive. Industry stakeholders are hopeful that a more supportive regulatory environment will foster innovation and growth in the U.S. crypto market. However, legal experts caution that dismissing enforcement actions could set a risky precedent, emphasizing the need for balanced regulation that ensures market integrity while promoting technological advancement.

As the SEC transitions under new leadership, the agency is expected to undertake a comprehensive review of its cryptocurrency regulations, aiming to provide clearer guidelines on when digital assets are considered securities. While the process of implementing new policies may take several months, the anticipated changes reflect the Trump administration’s commitment to reshaping the regulatory landscape for cryptocurrencies, potentially ushering in a new era of regulatory clarity and industry growth.

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Ronin offers $10M grant program for Web3 developer growth

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The Ronin Network, an Ethereum Virtual Machine (EVM) blockchain renowned for its gaming applications, has unveiled a $10 million grants program aimed at fostering Web3 developer growth. Announced on January 16, the Ronin Ecosystem Grants initiative seeks to expand the blockchain’s capabilities by attracting developers focused on gaming, consumer decentralized applications (DApps), and decentralized finance (DeFi) protocols.

The grants are structured to support both developers and waypoints, which are crypto-based bridge services. Builder grants offer up to $300,000 in Ronin (RON) tokens, while waypoint gas grants provide up to $20,000 in RON. Approved projects will receive milestone-based funding to cover essential costs such as development integrations, audits, and deployment. The initiative emphasizes supporting teams and game studios with innovative ideas to enhance the Ronin ecosystem.

Beyond financial support, selected projects will gain increased visibility through Ronin’s platforms, including the Ronin Wallet and the Ecosystem Grants website. Additional benefits encompass access to the Ronin Builders Discord for collaboration with other teams, venture capitalists, and advisors, as well as integration opportunities with Web3 games and ecosystem partners. Approved developers may also receive discounts from infrastructure and tooling providers.

This initiative reflects Ronin’s commitment to becoming a foundational platform for gaming and consumer DApps. By incentivizing developers to address user challenges, onboard new participants, and boost on-chain activity, the grants program aims to drive innovation and growth within the Ronin ecosystem. The application process has no set deadline, with reviews expected to take up to four weeks.

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