Sri Lankans' Guide To Cryptocurrency Investment

Investing in cryptocurrency in Sri Lanka is a relatively simple process, but it's important to be aware of the risks involved. The crypto industry in Sri Lanka is currently unregulated, and purchasing virtual assets with credit cards is prohibited under foreign currency exchange laws. However, this hasn't stopped the growing popularity of cryptocurrencies in the country, with platforms like Paxful seeing a significant increase in trading volume. So, if you're looking to invest in cryptocurrency in Sri Lanka, here are the steps you need to take:

1. Choose a Crypto Platform or Trading App: Select a platform that suits your trading objectives and offers the cryptocurrency you want to invest in. Popular options include Binance, Coinbase, and Kraken.

2. Register and Verify Your Account: Sign up with your chosen platform and provide the required documentation for identity verification, such as a passport or national identity card.

3. Deposit Funds: Link a bank account or credit card to your account and deposit fiat currency. Different platforms offer different payment methods, so choose one that suits your needs.

4. Buy Cryptocurrency: Once your account is funded, you can purchase your chosen cryptocurrency. Remember that you don't need to buy a full unit of a cryptocurrency like Bitcoin; you can buy a fraction to fit your budget.

5. Store Your Cryptocurrency in a Secure Wallet: To ensure the safety of your investment, it's recommended to withdraw your cryptocurrency to a personal hardware wallet. Built-in wallets offered by exchanges may be more convenient, but they pose a higher security risk.

Register with a crypto platform or trading app

To invest in cryptocurrency in Sri Lanka, you'll need to register with a crypto platform or trading app. These platforms act as intermediaries between buyers and sellers. Examples of such platforms include Binance, Coinbase, Bittrex, Stormgain, eToro, and AvaTrade.

When registering with a crypto platform or trading app, you will typically need to provide some form of identification, such as a passport or national identity card. You may also be required to complete a Know Your Customer (KYC) process, which may include verifying your address and providing a photo ID.

It is important to carefully research the various platforms available in Sri Lanka and choose one that aligns with your investment goals, offers the desired level of security, and provides suitable payment methods. Some platforms may also offer the ability to buy fractions of cryptocurrencies, allowing you to invest smaller amounts.

Once you have chosen a platform, the next step is to create an account and follow the platform's instructions to complete the registration process. This typically involves providing your personal information, setting up a payment method, and, in some cases, verifying your email address or phone number.

After successfully registering and setting up your account, you can then proceed to deposit funds and start investing in cryptocurrencies of your choice.

Upload ID or passport

To invest in cryptocurrencies from Sri Lanka, you will need to open an online trading account with an app or platform that allows you to buy cryptos. This will require you to upload a few personal documents through their app, including:

• A passport or national identity card
• Proof of address
• A photo ID

To upload your ID or passport, you will need to take a clear picture of the document with your smartphone or DSLR camera. Ensure that you take the photo in front of a plain, single-colour background. You can then upload the photo to the app or platform and crop it to the required size.

Once your account has been approved and opened, you can deposit cash or cryptocurrencies and start trading. It is important to note that the crypto market is open 24/7 and that cryptocurrencies are highly volatile and vulnerable to market collapses. Therefore, it is essential to do your research and only invest what you can afford to lose.

Deposit cash or crypto

Once you've chosen a platform or app, you'll need to deposit some money to start investing. Most platforms allow you to deposit money via credit or debit card, bank transfer, or e-wallet. Some common e-wallet options include PayPal, PaySafe, Skrill, SafetyPay, and Neteller. It's worth noting that the depositing and withdrawal methods will depend on the platform you choose.

Before depositing any money, it's recommended to get familiar with the platform by opening a Demo account and trying it out first. This way, you can decide if you want to deposit money or not.

If you already own some cryptocurrency, you can also deposit that into your account. Just make sure the platform you choose supports the type of cryptocurrency you want to deposit.

It's also important to keep in mind that the legality of bitcoin and other cryptocurrencies in Sri Lanka is currently unknown, and there are some regulatory risks involved. Additionally, make sure you are aware of the potential scams and fraudulent schemes that have been reported in the Sri Lankan crypto space.

Choose the right moment to buy

The crypto market is open 24/7, and there are two ways to invest in cryptos in Sri Lanka. You can either acquire the token with a wallet or invest in it through CFDs (financial derivatives).

• Analyze the price swings: Understand the reasons behind price fluctuations before investing. Don't assume that past performance guarantees future results.
• Develop an investment strategy: Have a clear plan for when you will open and close buy orders. Design a scenario chart and adjust it as needed.
• Don't run after the money: Stick to your investment strategy and avoid emotional trading decisions. While frequent trading can lead to higher transaction costs, swing trading over a longer period can minimize these costs.
• Leverage cryptocurrencies wisely: Leverage can amplify both profits and losses. While it provides opportunities for higher returns, it also comes with the risk of losing your entire balance.
• Expect ups and downs: Accept that there will be good and bad days in the market. Maintain capital in your account to sustain your trades over time, and only invest what you can afford to lose.
• Choose a reliable crypto platform: Compare the fees, security measures, payment methods, and other features offered by different platforms. Consider the range of altcoins available and whether the platform is regulated in Sri Lanka.
• Watch out for fees: Compare the trading fees charged by different exchanges, as they can vary significantly. Also, consider deposit and withdrawal fees, especially for transactions in digital currency.
• Understand fund storage: Look for platforms that store customer funds in segregated accounts and use cold storage (offline) for added security. Choose an exchange that is transparent about its finances and has been audited by a reputable firm.
• Consider user experience: Evaluate how easy the platform is to navigate and whether it offers the tools you need for your trading strategy. If you plan to trade on your phone, ensure the platform has a user-friendly mobile app.
• Research the verification process: Before signing up, check the account verification requirements and have the necessary documents ready. If you prefer to maintain privacy, consider exchanges that don't require ID verification.
• Look at the range of cryptocurrencies: Beyond Bitcoin, consider the number of altcoins available on the exchange. If you plan to trade a variety of coins, choose a platform that offers a wide selection.
• Check accepted currencies and payment methods: Ensure the exchange accepts your preferred payment methods, such as card payments or e-wallets. If you don't have access to US dollars, consider a local exchange or a larger platform like Binance.
• Explore additional features: Think about whether you want to stake, lend, or borrow coins. Using multiple platforms can be inconvenient, so choose an exchange that offers the services you need.
• Evaluate customer service: Consider how accessible and responsive the exchange's customer support is. Look for live chat features, WhatsApp or Telegram support, and read third-party reviews to gauge their effectiveness in addressing user queries.

Send crypto to a personal wallet

Once you have purchased your chosen cryptocurrency, you can decide where to store it. Crypto wallets come in many forms, including web, mobile, desktop, paper, and hardware wallets. Each type of wallet has its own advantages and disadvantages, and the right choice for you will depend on your personal requirements and purpose.

Hardware wallets (cold wallets) often come in the form of a USB drive. Popular names in hardware wallets include Ledger Nano and Trezor. These wallets are considered the most secure and the best choice if you invest and don't plan to trade regularly. Each time you transfer crypto from your wallet to an exchange, or vice-versa, you will spend a small amount of transaction fee.

Software wallets (warm wallets) are applications you can download onto your computer or mobile device. Hot wallets use encryption to protect your crypto assets; therefore, it is vital to ensure that your passwords are stored safely when using these wallets.

Web wallets (hot wallets) are offered mostly by exchanges. When deciding which exchange to use, it is recommended to check the list on Coingecko. Binance is currently the largest exchange, and it offers a 5% reward on your transaction fees. However, it is unwise to keep all your coins in a centralised exchange in the long term, as these exchanges are vulnerable to hackers as they are not developed using blockchain technology.

Some other leading wallets as rated by Investopedia include the Ledger Nano and Trezor One hardware wallets, and MyEtherWallet and Exodus software wallets.

It is important to note that if you lose your wallet, your password, or have your account hacked, there is often no way to recover your cryptocurrency. There is an estimated 1 million Bitcoins lost by users to date, so it is crucial to take care of your assets and choose a wallet that suits your needs.

Frequently asked questions