The Cabinet has approved a regulatory framework for virtual assets and cryptocurrency service providers, naming the Securities and Exchange Commission as the official regulator to address money laundering and terrorist financing risks.

Sri Lanka's Cabinet of Ministers has approved a proposal to establish a formal regulatory framework for virtual assets and service providers, designating the Securities and Exchange Commission (SEC) as the primary regulatory authority. The decision follows recommendations from a specialized sub-committee operating under the National Coordination Committee for Anti-Money Laundering and Countering the Financing of Terrorism.

Currently, Sri Lankan users access cryptocurrencies and digital assets through unregulated channels including online platforms, peer-to-peer exchanges, and direct transactions. These activities operate entirely outside the domestic regulatory framework, with virtual asset service providers functioning without registration requirements, compliance obligations, or reporting standards. According to Cabinet spokesman Nalinda Jayatissa, this regulatory gap has created vulnerabilities to financial crimes, including money laundering and terrorist financing.

Under the new oversight model, the SEC will work jointly with the Central Bank's Financial Intelligence Unit and the Inland Revenue Department to enforce compliance. Virtual asset service providers will be required to meet anti-money laundering and counter-terrorism financing requirements, maintain customer due diligence and know-your-customer protocols, and submit mandatory transaction reports. The framework aims to bring Sri Lanka's cryptocurrency sector into alignment with international financial surveillance standards and prevent the country from appearing on international risk lists.