Sri Lanka’s recent economic uncertainty seems to be the driving force behind its interest in cryptocurrency and the government's new exploration into KYC technology.
A report presented to Sri Lankan central bank governor Ajith Nivard Cabraal on Monday detailed the results of a now-completed Know-Your-Customer, or KYC, proof-of-concept project.
The project Sri Lanka's central bank, known as the CBSL, included three collaborators who developed the blockchain-based KYC platform concept. The KYC platform was also tested by the CBSL and 10 regional and international commercial banks, including Amana Bank, Bank of Ceylon, Cargills Bank, Commercial Bank of Ceylon, DFCC Bank, Hatton National Bank, HSBC, National Development Bank, People’s Bank and Standard Chartered Bank. The team initiated the project in July 2019 and completed the development and testing of the experimental platform on June 10 of this year.
“We invited software companies to develop a shared KYC PoC free of charge, as a national project. The response to join this project, both locally and internationally, has been extremely heartening and we are happy to say that we have finalised selecting suitable applicants to begin development shortly,” stated Central Bank director of Payments and Settlements D. Kumaratunge.
The project was part of a larger Sri Lankan government initiative, titled Vistas of Prosperity and Splendor, under the country's National Policy FrameWork. As reported by Crypto Daily UK, the Minister of Project Coordinating and Monitoring Namal Rajapaksa, proposed a new “crypto ommittee” to oversee the exploration into the possibilities of using blockchain and crypto mining into Sri Lanka’s plans to create a more digital society.
Like many countries around the world, Sri Lanka has suffered serious economic impacts due to the ongoing global pandemic. Government statistics suggest that the country is now recovering from its -16.4 GDP growth back in Q2 2020. It has lost over $400 million in income from the tourist industry, however, and $1.3 billion from overseas employment during the pandemic.
Sri Lanka’s recent economic uncertainty appears to have been the driving force behind its interest in cryptocurrency and the government's new exploration into KYC technology. The volume of the Sri Lankan Rupee on the peer-to-peer exchange Paxful went through the roof in 2021. The country’s spike in cryptocurrency trading and investing led the Sri Lankan government to issue a warning to the public regarding the hazards of investing in cryptocurrencies.
The Sri Lankan government's crypto-centric exploration echoes the regulatory actions of other governments around the world. A tax provision in United States President Joe Biden’s stalled Infrastructure bill has worried many in the U.S. blockchain industry. Also reported by Reuters in July, the EU announced the formation of a new agency to crack down on money laundering and increase transparency in cryptocurrency.
The CBSL has taken stronger regulatory steps in recent years since it had been put on the G7’s intergovernmental Financial Action Task Force, or FATF “Grey List” in 2016 for non-compliance in four areas: International Cooperation, Supervision, Legal Persons and Arrangements and Targeted Financial Sanctions on Proliferations. The country was taken off FAFT’s grey list in October of 2019.
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