Port City bitcoin exchange to be established in 3 months
Local DocuSign integrator Bridge Advisory and Consulting (BAC) claim that they will be launching Sri Lanka’s first regulated crypto exchange within the Port City in the coming 3-month period. They claimed to have communicated with the Securities and Exchange Commission alongside the Central Bank to create a regulatory framework.
BAC Co-Founder Michael Sathasivam noted that the exchange could result in exponential growth in the capital markets of Sri Lanka given the growth trajectory of the broader cryptocurrency markets.
 Michael Sathasivam |
Sathasivam was speaking on June 11 at a webinar organized by BAC to showcase a cryptocurrency-linked strategy for economic recovery. Currently, there are over an estimated 300,000 Sri Lankans with some form of virtual crypto asset in their possession. Sri Lankans and neighbouring countries use either online services or community-organized meetup events to exchange their assets. The penetration of the cryptocurrency ecosystem into Sri Lanka was recently showcased on popular blogs when crypto enthusiasts were able to travel and transact with local guesthouses transacting in virtual currency. Given the recent collapse in the Rupees, the industry opines that there has been a large unregulated movement into cryptocurrency by leading businessmen.
Sathasivam noted that the rents taken by the banking system for the administration of the payments system were too high given the advent of digitization. Booking agencies facilitating online transactions take an estimated US$ 15 million profit just in processing fees for bookings within Sri Lanka.
Sathasivam reiterated claims that the regulator would continue to work to stifle the advent of inbound payments via the PayPal ecosystem. PayPal has always been able to undercut the rates offered by the likes of Western Union. Given the scale of remittance proceeds to Sri Lanka, the entry of PayPal would hamper significant supernormal profits that accrue to the banking sector. The historical excessive margins charged by the banking sector on foreign currencies have allowed for the long-term survival of the informal exchange market which has subsequently perpetuated the country’s dollar insolvency.
Given widespread acknowledgement that there has been the politicization of dollar availability the broader industry has called on the recent tax changes to include a 40% rated level of taxation on foreign exchange-linked gains for companies. This would punish arbitrage seekers and be an effective way of inducing companies to convert currency. The industry has also called on the Central Bank to allow price competition to exist within the transaction space and force the major merchants to pass on to the consumer the cost of transacting. The broader industry has accused the regulator, which has an ownership stake in the for-profit payment company LankaClear, of stifling the domestic payment ecosystem.
They note that price competition would hurt the banking system which gains significantly from excessive rents garnered by the Visa and Mastercard ecosystem.
BAC claims to be working with real estate developers to tokenize the ownership of apartments. Given the widespread availability of off-the-shelf software, the establishment of an exchange is only contingent on regulatory allowance. Financial centres have been working on a ‘race to the bottom’. (DP)