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Friday June 18th, 2021
Economy

Sri Lanka minister eyes Bitcoin exchange in Port City amid China crypto crackdown

ECONOMYNEXT – Sri Lanka plan to allow young people to play the digital currency market in a dollarized China-backed special economic zone, the island’s sports minister said, a day after Beijing kicked off a crypto crackdown that sent digital currencies reeling.

“New currencies are emerging in the world,” Minister Rajapaksa told parliament on May 20, during a debate to set up a governing law for Colombo Port City, which is on land reclaimed by a Chinese company.

“There is Bitcoin, there is crypto. These exchanges we must bring to Sri Lanka. We clearly say the world’s modern ways of transacting we will bring to the Port City.

“For that we will take steps to bring Crypto, Bitcoin exchanges. Through this we can take the benefits of the Port City in the way it suits the future generation to our rural youth.”

A day earlier the People Bank of China tightened a ban on crypto currency trading and use.

“Institutions must not accept virtual currencies, or use them as a means of payment and settlement,” Reuters, a news agency said, citing a joint statement from National Internet Finance Association of China, the China Banking Association and the Payment and Clearing Association of China.

“Nor can institutions provide exchange services between cryptocurrencies and the yuan or foreign currencies.

“Additionally, institutions were prohibited from providing cryptocurrency saving, trust or pledging services and issuing crypto-related financial products. And virtual currencies must not be used as investment targets by trust and fund products.”

Sri Lanka’s central bank has earlier warned the pubic against trading in crypto currencies.

However many young people are trading in crypto according those familiar with the activity.

A 100 ‘tethers’ a type of digital credit which is used to buy cryto currencies and which pegged one-to-one with the US dollar is sold at around 22,000 rupees according to crypto punters.

The price is about 10 percent higher than official exchange rate for the 100 US dollars set at 20,300 rupees.

It is also higher than the kerb market price for US dollars which moved up in recent months after unprecedented money printing over the past year put pressure on the currency and triggered tighter exchange controls.

Crypto currencies had become popular targets for speculation after the US Federal Reserve in particular went on a money printing spree, undermining confidence in state-backed currencies, inflating all kinds of asset classe.

Following the Chinese crackdown Bitcoin had plunged as low as 30,202 dollars per coin early Wednesday after starting the day around the 40,000 dollars, reports said.

Ethereum had fallen below 2,000 dollars per unit from 3,000 dollars on Tuesday, before reclaiming some of its lost ground. Ether was down around 22 percent at around 2,600 dollars on Wednesday.

A dogecoin, set up partly as a joke, lost more than 24 percent of its value. (Colombo/May21/2021)

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