Sri Lanka Shapes Virtual Asset Rules Ahead of Global AML Peer Review 📈

Sri Lanka is finalizing draft legislation to regulate virtual assets and Virtual Asset Service Providers (VASPs) as it prepares for its third Mutual Evaluation on Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT). • Regulatory Framework & Authority: The Securities and Exchange Commission (SEC) will lead the regulation of virtual assets, trading platforms, and custodians. Cabinet approved the policy framework on July 27, establishing clear operational boundaries between the SEC and the Central Bank of Sri Lanka (CBSL). • Asset Scope & Utility: Virtual assets will be treated strictly as investment assets and will not be permitted as legal tender. Domestic payment uses will be restricted during the initial phase, which focuses on licensed crypto exchanges and custodians. • Implementation Roadmap: The VASP concept paper was submitted to the Legal Draftsman's Department on September 24 to amend the SEC Act. GovTech Sri Lanka and the Legal Draftsman’s Department are implementing an AI-assisted legislative drafting pilot under human and legal oversight. Parallel steps include establishing licensing schemes, AML controls, and reporting systems.