ECONOMYNEXT – The port city of Colombo in Sri Lanka will allow cryptocurrency trading subject to certain limitations, said Saliya Wickremasuriya, chairman of the dollarized special investment zone governance commission.
“We have included digital assets in the asset classes that the port city will host in terms of exchanges in the future,” Wickremasuriya said.
“We expect this will boost a list of other requirements such as settlement banks, correspondent banks.”
There are a few checks and balances in this plan. One of them is that rupee tokens will not be allowed.
“The other is that we will not allow initial coin offerings in the first two years.”
Amid excessive money printing by conventional state-owned reserve currencies in recent years, cryptocurrencies such as Bitcoin have become popular speculative assets.
Cryptocurrencies through the use of blockchain technology have the potential to settle domestic and cross-border contracts transparently.
However, cryptocurrencies have so far not been commonly used as the denominator currencies for product pricing, mainly due to excessive price volatility due to inappropriate anchors.
Activity in the port city area itself must be allowed in multiple currencies with better anchors (mainly inflation targeting clean float regimes) and it will be shielded from the ongoing policy errors of the Sri Lanka Monetary Council. which led to currency collapses, exchange rates and trade controls.
The U.S. Treasury said on Nov. 1 that the country plans to allow “stablecoins,” cryptocurrencies that are supposed to function as a currency board (after pegging an already accepted currency) and not having its own anchorage.
These existing stable coins include the Tether.
Sri Lanka also had a currency board (a fixed exchange rate) until 1950, when a Latin American style central bank with a faulty double anchor was put in place with exchange controls. , trade controls, then people started going to work in the Middle East and sending remittances.
When Sri Lanka had a currency board, the country imported labor and remittances went out.
Stablecoins are primarily used to purchase other digital assets, but the U.S. Treasury has said they could be used as a form of payment by households and businesses.
“Well-designed stablecoins with appropriate oversight have the potential to support advantageous payment options,” Treasury Secretary Janet L Yellen said.
“But lack of proper monitoring poses risks to users and the system as a whole.
“Current oversight is inconsistent and fragmented, with some stablecoins effectively falling outside the regulatory scope.
“The Treasury and the agencies involved in this report look forward to working with members of Congress on both sides on this issue. While Congress considers action, regulators will continue to operate within their mandates to address the risks of these assets. “
Read more: President Biden’s Financial Markets Task Force Releases Stable Coin Report and Recommendations
Why the Sri Lankan rupee depreciates, creating currency crises: Bellwether
She said issuers will become insured depositories to guard against “stable coin flows”.
“Since digital asset activity falls under the purview of the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), the SEC and CFTC have broad enforcement authorities. , regulation and supervision that may address some of these issues. concerns, ”the Treasury statement said.
“To prevent the misuse of stablecoins and other digital assets by illicit actors, the Treasury will continue to lead the efforts of the Financial Action Task Force (FATF) to encourage countries to implement international standards AML / CFT and to seek additional resources to support national AML / CFT surveillance. regulations.”
Currently, paper fiat money is also used for a range of illicit activities without electronic tracking.
The Board of Commissioners of Currency of Ceylon, Thomas Cooke Travelers Checks, American Express Travelers Checks, which also used the currency board principle, have never depreciated against the currencies to which they were anchored, as a loosely anchored bank with open market operations. (Colombo / Dec06 / 2021)