No legal tender status for cryptocurrency but earnings subject to tax, Government clarifies

Although cryptocurrencies are not recognized as legal tender in Sri Lanka, income generated through cryptocurrency transactions and related activities will be treated as “other income” by the Inland Revenue Department, the Deputy Minister of Finance and Planning, Anil Jayantha Fernando told Parliament today (09).Responding to questions raised by Member of Parliament Ravi Karunanayake, Deputy Minister Fernando said that under the Central Bank of Sri Lanka Act, No. 16 of 2023, the Sri Lankan Rupee remains the country’s only legal tender, while cryptocurrencies and other virtual or digital assets are not accepted as a means of payment.He stated that crypto assets are not regulated in Sri Lanka as an asset class or financial instrument. The Central Bank of Sri Lanka has not licensed or authorized any cryptocurrency trading platforms, digital asset exchanges, mining operations, or related service providers to operate within the country.The Deputy Minister further noted that cryptocurrency trading activities are neither formalized nor supported through the regulated financial system. As digital asset platforms are not licensed or supervised by any domestic authority, individuals engaging in such activities do so at their own risk.He said the Central Bank has repeatedly informed the public since 2018 that cryptocurrencies are not recognized as legal tender in Sri Lanka.Deputy Minister Fernando also confirmed that existing regulations do not provide recognition for crypto or virtual asset investments. He added that holders of residence cards in Sri Lanka are prohibited from making foreign exchange payments for virtual currency transactions.He emphasized that Sri Lanka’s formal financial system cannot be used to facilitate cryptocurrency-related transactions under the country’s current regulatory framework.