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The Tightrope Walk on Decentralised Finance and Cryptocurrencies



By Charith Gamage

Cryptocurrencies together with Decentralised Finance (DeFi), the finance ecosystem that extends cryptocurrencies into banking territory, can positively impact developing countries. But it is not quite so straightforward and is still a double-edged sword for developing markets like Sri Lanka. So, how should the country position itself to face the key challenges ahead?

Since its inception following the Global Financial Crisis in 2007-2008, as an alternate digital asset, cryptocurrency has always been a two-edged sword, abundantly subjected to scepticism.

Some of this scepticism has a rationale behind it. Cryptocurrencies do not have an underlying cash flow, such as that for stocks of firms, nor do they have an inherent material value, such as for assets like gold. Being located inches away from the regulatory radar, they can also be equally prone to criminal activities. If that is not enough, bitcoin mining, the process by which new transactions are validated on the network, consumes a lot of energy. So, despite being a crypto enthusiast, even billionaire Elon Musk once stated, it has an environmental impact, too [1].

In the face of these challenges, the recent cryptocurrency price surge with the Covid-19 Pandemic has taken many by surprise. What caused the market to embrace them, spearheaded by its most popular type, Bitcoin’s spiralling 600%+ rally? According to crypto proponents, the value stems primarily from its design that can self-sustain as an alternative decentralised system to the traditional systems. In other words, the market is ready to pay the price for its ability to function as an asset over which no centralised person or authority has control. So, the claim, as the pandemic engulfed global economies, is that investors may have lost faith in central bank policies and their pursuit for an alternate asset that has resulted in this price movement.

DeFi, on the other hand, extends this concept and allows cryptocurrencies to function in a decentralised banking environment that may even have immense benefits to developing countries. As the debate continues, it is worth finding out more on the recent emergence of DeFi; how could it unlock the potential of Emerging/Frontier markets, and at what cost? What are the key hurdles to pull the meat from the bone moving forward?

What is DeFi, and how does it work?

The idea of DeFi is more broad-based than one of its workhorses, cryptocurrencies, which most are familiar with as a medium of exchange or store of value, and it builds on a fundamental structure known as the blockchain. The system allows it to operate without the need for intermediaries, such as traditional financial institutions like conventional commercial banks, brokerages, and of course, authorities such as central banks. However, it has its own ecosystem that recreates the traditional financial system. So, it is logical to say that DeFi refers to the decentralised banking and financial system that the technology is based on and includes components such as lending and borrowing services for cryptocurrencies (and many more). To put it simply, it is an alternative banking system in the digital space with digital currencies that has no middlemen (such as commercial or central banks who have controlling power) and with rules that are already written into it. Today, it mostly runs on the Ethereum blockchain, the second most popular currency after Bitcoin. DeFi has rapidly evolved in recent years, and, for example, Aave, Marker, and Curve Finance are the biggest lending systems in this space, with the sum of all assets deposited in DeFi closer to 45 billion USD [2].

Without banks or lawyers, as in the traditional financial system, DeFi is built with smart contracts, a self-executing contract built on the blockchain when predetermined conditions are met, and allows economic agents such as the general public and firms to engage in banking activities.

Because this architecture differs fundamentally from bringing the same traditional banking into the digital space, as happens in online banking, many can see that it will benefit developing countries when traditional financial systems fall apart. Nevertheless, it comes at a cost, where the country needs to overcome challenges to harness its potential.

Why exploring DeFi is pronounced in emerging and developing markets

It is not a secret that the lack of financial intermediation in the developing world under the conventional system hinders their economic potential. Although Sri Lanka’s unbanked population (26%) is somewhat lower than the global average (31%), it is unclear how certain groups’ failure to conform to formal regulations and paperwork around these institutions distances them from the entire expected services they desire (Data Source Findex 2017). On the other hand, economic agents have fewer investment opportunities to invest their wealth for a better return in economies with underdeveloped markets. DeFi seems to have better answers to those questions.

For example, a UNICEF project shows that DeFi can uplift those lives [3]. The project, Satchel, a Blockchain-based DeFi service created by a research group from Berkeley, helps fulfil the financial needs of those underprivileged communities by allowing them to pool their funds together and earn interest. The concept could be extended to pool their money and lend it out to small businesses; in this way, the community can use the interest earned for their purposes while the local small businesses fulfil their funding needs. So, DeFi can thus give an alternative, if not more than that, to regular banking, for small businesses and communities in rural regions, even if they are unable to satisfy the criteria of traditional banking.

Apart from improving financial inclusion among rural communities, DeFi clearly has other benefits with proper education, such as an efficient cross-border fund transfer for businesses and remittances. Sending remittance through cryptocurrency can gain more attention in the future as a low-cost solution for ordinary remittance transfers and currency conversions that can eat up as much as 7% of those flows. Also, DeFi can be easily integrated with the Universal Basic Income (UBI) programmes discussed in a previous article that empower low-income communities to lead the economy[4].

Most importantly, decentralisation allows the market to gain alternative power over the ability of traditional institutions to control the market by devaluing or increasing the money supply or by imposing unhealthy regulations on certain sectors. This balance could be healthy for the economy as it brings competition to the market over the conventional institutions.

What are the key challenges to be solved?

Although DeFi has the potential to boost economic activities, proper integration with society needs much more effort, including the development of digital infrastructure and literacy. A recent Daily FT editorial highlighted this challenge, citing that digitisation efforts will not be fruitful unless the underlying foundation is strengthened [5].

In addition, the emergence of an alternate banking system via DeFi can cause unprecedented challenges to economies. Of course, it can create “systemic risks” and propagate instabilities in conventional financial systems, depending on how interlaced they are. Having dominated the conventional monetary system, they can also lessen the effectiveness of the monetary tools and power of the institutions such as central banks. Although these discussions are still rudimentary, given that economics related to DeFi have not been tested at scale, they will be more hot topics as the technology grows.

On the other hand, DeFi regulation is one of the most daunting tasks, as exemplified by the experiences of many countries that are currently trying to combat it. At the moment, bringing capital gain income from crypto assets under the tax net, regulating crypto exchanges to avoid the misuse of technology, and curbing phoney cryptocurrency schemes, are the most popular topics in this space. Meanwhile, a Forbes article, citing an expert report by Chainalysis, shows that crypto in criminal activities is not as large as commonly believed [6]. While this fraction was deficient, 2.1% in 2019 and 0.34% in 2020 out of the total transaction volume, the article shows that the traditional non-crypto methods may still facilitate illicit activities much more frequently than these methods. Although this is a positive indication for authorities to welcome the technology, there is no guarantee that they would be exacerbated in the developing nations with relatively weaker institutions once popularised. With that being said, the overregulation approach may not be the best answer, but the easiest and costliest approach that wipes out complete benefits in the dash for DeFi.

The Way Forward

Despite the debate around cryptocurrency, the decentralised currency together with DeFi, the alternate decentralised financial system, undoubtedly can cause a significant impact on the developing world to increase the productivity of those economies. In particular, it is more pronounced to allow financial intermediation for those who found refuge under the conventional system for various reasons. It has gone mainstream now on Wall Street while top-level universities and researchers are involved in the development, despite all chaos surrounding cryptocurrency. More importantly, the underlying technology, blockchain, is considered one of the most promising emerging technologies at the moment.

From the Sri Lankan perspective, now it seems the government insists on looking deeply at the crypto and blockchain space[7]. This initiative is a positive sign and, if successful, will be a good foundation for exploring the ecosystem, DeFi, more broadly and carefully for better policies.

Not to mention, diving down the rabbit hole of DeFi requires a cohesive approach strengthening the digital infrastructure, facilitating a healthy Conventional-DeFi integrated ecosystem, hunting for policy instruments to combat the knock-on effects, and establishing a healthy and supportive regulatory framework. So, it will help the country shape the landscape to stay on par with the peer trading partners trying to reap the full potential of the technology under a controlled environment, and, of course, without blindly embracing it nor throwing out the baby with the bathwater.

The writer, a former Senior Assistant Director of the Central Bank of Sri Lanka, is a PhD candidate attached to the Monash University, Australia. He pursued his undergraduate studies in Engineering from the University of Moratuwa and graduate studies in Finance/Economics from the University of California, Berkeley, USA and the University of New Mexico, USA. He would like to thank Abigayle Goldstein (Lobo Friends Program at UNM) for commenting on the article and helpful suggestions. The views and opinions expressed in this article are those of the writer, and he could be reached via


Have Humanities and Social Sciences muddied water enough?



By Maduranga Kalugampitiya

The domain of the humanities and social sciences is under attack more than ever before. The relevance, as well as usefulness of the degrees earned in those fields, is being questioned left, right, and centre. The question of whether it is meaningful at all to be spending, if not wasting, the limited financial resources available in the coffers to produce graduates in those fields is raised constantly, at multiple levels. Attempts are being made to introduce a little bit of soft skills into the curricula in order to add ‘value’ to the degree programmes in the field. The assumption here is that either such degree programmes do not impart any skills or the skills that they impart are of no value. We often see this widely-shared profoundly negative attitude towards the humanities and the social sciences (more towards the former than towards the latter) being projected on the practitioners (students, teachers, and researchers) in those areas. At a top-level meeting, which was held one to two years ago, with the participation of policy-makers in higher education and academics and educationists representing the humanities and social sciences departments, at state universities, a key figure in the higher education establishment claimed that the students who come to the humanities and social sciences faculties were ‘late-developers’. What better (or should I say worse?) indication of the official attitude towards those of us in the humanities and the social sciences!

While acknowledging that many of the key factors that have resulted in downgrading the humanities and social sciences disciplines are global by nature and are very much part of the neoliberal world order, which dominates the day, I wish to ask if we, the practitioners in the said fields, have done our part to counter the attack.

What the humanities and the social sciences engage with is essentially and self-consciously social. What these disciplines have to say has a direct bearing on the social dimension of human existence. It is near impossible to discuss phenomena in economics, political science, or sociology without having to reflect upon and use examples from what happens in our lives and around us. One cannot even begin to talk about teaching English as a second language without taking a look at her/his own experience learning English and the struggles that many people go through at different levels doing the same. One cannot talk about successful ways of teaching foreign languages without recognizing the need to incorporate an engagement with the cultural life of those languages at some level. No reading of an artwork—be it a novel, a movie, a painting, a sculpture, a poem, whatever—is possible without the reader at least subconsciously reflecting upon the broader context in which those artworks are set and also relating her own context or experience to what is being read. A legal scholar cannot read a legislation without paying attention to the social implications of the legislation and the dynamics of the community at whom that legislation is directed. The point is our own existence as social beings is right in the middle of what we engage with in such disciplines. To steal (and do so self-consciously) a term from the hard/natural sciences, society is essentially the ‘laboratory’ in which those in the humanities and social sciences conduct their work. There may be some areas of study within the humanities and social sciences which do not require an explicit engagement with our social existence, but I would say that such areas, if any, are limited in number.

Needless to say that every social intervention is political in nature. It involves unsettling what appears to be normal about our social existence in some way. One cannot make interventions that have a lasting impact without muddying the water which we have been made to believe is clear. How much of muddying do we as practitioners in the field of humanities and social sciences do is a question that needs to be asked.

Unfortunately, we do not see much work in the humanities and social sciences which unsettles the dominant order. What we often see is work that reinforces and reaffirms the dominant structures, systems, and lines of thought. Lack of rigorous academic training and exposure to critical theory is clearly one of the factors which prevents some scholars in the field from being able to make interventions that are capable of muddying the water, but the fact that we sometimes do not see much muddying even on the part of the more adept scholars shows that lack of rigorous training is not the sole reason.

Muddying the water is no simple matter. To use a problematic, yet in my view useful, analogy, a scholar in the said field trying to make an intervention that results in unsettling the order is like a hydrogen atom in H2O, ‘water’ in layperson’s language, trying to make an intervention which results in a re-evaluation of the oxygen atom. Such an intervention invariably entails a re-evaluation of the hydrogen atom as well, for the reason that the two atoms are part of an organic whole. One cannot be purely objective in its reading of the other. Such an intervention is bound to be as unsettling for the hydrogen atom as it is for the oxygen atom. Similarly, in a majority of contexts, a scholar in the area of the humanities and social sciences cannot make an intervention, the kind that pushes the boundaries of knowledge, without unsettling the dominant structures and value systems, which they themselves are part of, live by, and also benefit from. For instance, the norms, values, and practices which define the idea of marriage in contexts like ours are things that a male scholar would have to deal with as a member of our society, and any intervention on his part which raises questions about gender-based inequalities embodied in such norms, values, and practices would be to question his own privilege. Needless to say that such an intervention could result in an existential crisis for the scholar, at least temporarily. Such interventions also entail the possibility of backlash from society. One needs thorough training to withstand that pressure.

In place of interventions that unsettle the existing order, what we often see is work, which re-presents commonsensical knowledge garbed in jargon. To give an example from an area that I am a bit familiar with, much of the work that takes place in the field of English as a Second Language (ESL) identifies lack of motivation on the part of the students and also teachers and also lack of proper training for teachers as the primary reasons for the plight of English education in the country. This reading is not very different from a layperson’s understanding of the problem, and what we often see as research findings in the field of ESL is the same understanding, albeit dressed up in technical-sounding language. Such readings do not unsettle the existing order. They put the blame on the powerless. Very limited is the work that sees the present plight of English education as a systemic or structural problem. Reading that plight as a systemic problem requires us to re-evaluate the fundamental structures which govern our society, and such re-evaluation is unsettling is many ways. I argue that that is what is expected of scholarship in the ESL field, but unfortunately that is not what we see as coming out of the field.

If what gets produced as knowledge in the humanities and social sciences is jargonized commonsense, then the claim that such fields have nothing important to say is valid. If what a scholar in those fields has to say is not different to a layperson’s understanding of a given reality, the question whether there is any point in producing such scholars becomes valid.

In my view, the humanities and social sciences are in need of fundamental restructuring. This restructuring is not the kind which calls for the incorporation of a bit of soft skills here and a bit of soft skills there so that those who come out of those fields easily fit into predefined slots in society but the kind that results in the enhancement of the critical thinking capacity of the scholars. It is the kind of restructuring that would produce scholars who are capable of engaging in a political reading of the realities that define our existence in society and raise difficult questions about such existence, in other words, scholars who are capable of muddying the water.

(Maduranga Kalugampitiya is attached to Department of English, University of Peradeniya)

Kuppi is a politics and pedagogy happening on the margins of the lecture hall thatparodies, subverts, and simultaneously reaffirms social hierarchies.

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Selective targeting not law’s purpose



By Jehan Perera

The re-emergence of Donald Trump in the United States is a reminder that change is not permanent. Former President Trump is currently utilising the grievances of the white population in the United States with regard to the economic difficulties that many of them face to make the case that they need to be united to maintain their position in society. He is coming forward as their champion. The saying “Eternal vigilance is the price of liberty” is often attributed to the founders of the United States, Thomas Jefferson, Thomas Paine, Abraham Lincoln, among many others, though Lord Denning in The Road to Justice (1988) stated that the phrase originated in a statement of Irish orator John Philpot Curran in 1790. The phrase is often used to emphasise the importance of being vigilant in protecting one’s rights and freedoms.

Ethnic and religious identity are two powerful concepts by which people may be mobilised the world over. This is a phenomenon that seemed to have subsided in Western Europe due to centuries of secular practices in which the state was made secular and neutral between ethnicities and religions. For a short while last year during the Aragalaya, it seemed that Sri Lanka was transcending its ethnic and religious cleavages in the face of the unexpected economic calamity that plunged large sections of the population back into poverty. There was unprecedented unity especially at the street level to demonstrate publicly that the government that had brought the country to this sorry pass had to go. The mighty force of people’s power succeeded in driving the leaders of that government out of power. Hopefully, there will be a government in the future that will bring the unity and mutual respect within the people, especially the younger generations, to the fore and the sooner the better as the price is growing higher by the day.

But like the irrepressible Donald Trump the old order is fighting to stage its comeback. The rhetoric of ethnicity and religion being in danger is surfacing once more. President Ranil Wickremesinghe who proclaimed late last year that the 13th Amendment to the constitution would be implemented in full, as it was meant to be, and enable the devolution of power to be enjoyed by the people of the provinces, including those dominated by Tamils and Muslims, has gone silent on this promise. The old order to which he is providing a new economic vision is clearly recalcitrant on ethno-religious matters. As a result, the government’s bold plan to set up a Truth and Reconciliation Commission as promised to the international community in 2015 to address the unresolved human rights issues of the war, is reportedly on the rocks. The main Tamil political parties have made statements that they will not legitimise or accept such a mechanism in the absence of a genuine devolution of power. Politics must not override policies.


The sense of threat to ethnicity and religion looms too large once again for forward movement in conflict resolution between the different communities that constitute the Sri Lankan nation which is diverse and plural. Two unlikely persons now find themselves at the centre of an emotion-heavy ethno-religious storm. One is a comedian, the other is a religious preacher. Both of them have offended the religious sensibilities of many in the ethno-religious Sinhala Buddhist majority community. Both of their statements were originally made to small audiences of their own persuasion, but were then projected through social media to reach much larger audiences. The question is whether they made these statements to rouse religious hatred and violence. There have been numerous statements from all sides of the divide, whether ethnic, religious or political, denouncing them for their utterances.

Both comedian Nathasha Edirisooriya and pastor Jerome Fernando have apologised for offending and hurting the religious sentiments of the Buddhist population. They made an attempt to remedy the situation when they realised the hurt, the anger and the opposition they had generated. This is not the first time that such hurtful and offensive comments have been made by members of one ethno-religious community against members of another ethnic-religious community. Taking advantage of this fact the government is arguing the case for the control of social media and also the mainstream media. It is preparing to bring forward legislation for a Broadcasting Regulatory Commission that would also pave the way to imprison journalists for their reporting, impose fines, and also revoke the licences issued to electronic media institutions if they impact negatively on national security, national economy, and public order or create any conflict among races and religions.

In a free society, opportunities are provided for people to be able to air their thoughts and dissents openly, be it at Hyde Park or through their representatives in Parliament. The threat to freedom of speech and to the media that can arise from this new law can be seen in the way that the International Covenant on Civil and Political Rights (ICCPR) which is the world’s standard bearer on civil and political rights has been used and is being abused in Sri Lanka. It was incorporated into Sri Lankan law in a manner that has permitted successive governments to misuse it. It is very likely that the Broadcast Regulatory Commission bill will yield a similar result if passed into law. The arrest and detention of comedian Natasha Edirisooriya under the ICCPR Act has become yet another unfortunate example of the misuse of a law meant to protect human rights by the government. Pastor Jerome Fernando is out of prison as he is currently abroad having left the country a short while before a travel ban was delivered to him.


The state media reported that a “Police officer said that since there is information that she was a person who was in the Aragalaya protest, they are looking into the matter with special attention.” This gives rise to the inference that the reason for her arrest was politically motivated. Comedian Edirisooriya was accused of having violated the provisions in the ICCPR in Section 3(1) that forbids hate speech. Section 3(1) of the ICCPR Act prohibits advocacy of hatred that constitutes incitement to discrimination, violence or hostility. The international human rights watchdog, Amnesty International, has pointed out that in the case of Edirisooriya that for speech to be illegal on the grounds of being hate speech it requires “a clear showing of intent to incite others to discriminate, be hostile towards or commit violence against the group in question.” Amnesty International also notes that “When the expression fails to meet the test, even if it is shocking, offensive or disturbing, it should be protected by the state.”

Ironically, in the past there have been many instances of ethnic and religious minorities being targeted in a hateful manner that even led to riots against them, but successive governments have been inactive in protecting them or arresting their persecutors. Such targeting has taken place, often for political purposes in the context of elections, in blatant bids to mobilise sections of the population through appeals to narrow nationalism and fear of the other. The country’s political and governmental leaders need to desist from utilising the ICCPR Act against those who make social and political critiques that are outside the domain of hate speech. The arrest of Bruno Divakara, the owner of SL-Vlogs, under the ICCPR Act is an indication of this larger and more concerning phenomenon which is being brought to the fore by the Broadcasting Regulatory Commission bill.

The crackdown on the space for free expression and critical comment is unacceptable in a democratic polity, especially one as troubled as Sri Lanka, in which the economy has collapsed and caused much suffering to the people and the call to hold elections has been growing. The intervention of the Human Rights Commission which has called on the Inspector General of Police to submit a report on the arrest and its rationale is a hopeful sign that the independence of institutions intended to provide a check and balance will finally prevail. The Sri Lankan state will hopefully evolve to be a neutral arbiter in the disputes between competing ethnic, religious and partisan political visions of what the state should be and what constitutes acceptable behaviour within it. Taking on undemocratic powers in a variety of ways and within a short space of time is unlikely to deliver economic resurgence and a stable and democratic governance the country longs for. Without freedom, justice and fair play within, there can be no hope of economic development that President Wickremesinghe would be wanting to see.

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Girl power… to light up our scene



Manthra: Pop, rock and Sinhala songs

We have never had any outstanding all-girl bands, in the local scene, except, perhaps…yes The Planets, and that was decades ago!

The Planets did make a name for themselves, and they did create quite a lot of excitement, when they went into action.

Of course, abroad, we had several top all-girl bands – outfits like the Spice Girls, Bangles, Destiny’s Child, and The Supremes.

It’s happening even now, in the K-pop scene.

Let’s hope we would have something to shout about…with the band Manthra – an all-girl outfit that came together last year (2022).

Manthra is made up of Hiruni Fernando (leader/bass guitar), Gayathma Liyanage (lead guitar), Amaya Jayarathne (drums), Imeshini Piyumika (keyboards), and Arundathi Hewawitharana (vocals).

Amaya Arundathi and Imeshini are studying at the University of Visual and Performing Arts, while Gayathma is studying Architecture at NIMB, and Hiruni is the Western Music teacher at St. Lawrence’s Convent, and the pianist at Galadari Hotel, having studied piano and classical guitar at West London University.

They have already displayed their talents at various venues, events, weddings, and on TV, as well (Vanithabimana Sirasa TV and Charna TV Art Beat).

Additionally, the band showcased their talent at the talent show held at the Esoft Metro Campus.

The plus factor, where this all-girl outfit is concerned, is that their repertoire is made up rock, pop, and Sinhala songs.

Explaining as to how they came up with the name Manthra, founder member Hiruni said that Manthra means a word, or sound, repeated to aid concentration in meditation, and that the name was suggested by one of the band members.

Hiruni Fernando: Founder and leader of Manthra

She also went on to say that putting together a female band is not an easy task, in the scene here.

“We faced many difficulties in finding members. Some joined and then left, after a short while. Unlike a male band, where there are many male musicians in Sri Lanka, there are only a few female musicians. And then, there are some parents who don’t like their daughters getting involved in music.”

With talented musicians in their line-up, the future certainly looks bright for Manthra who are now keen to project themselves, in an awesome way, in the scene here, and abroad, as well.

“We are keen to do stage shows and we are also planning to create our own songs,” said Hiruni.

Yes, we need an all-girl group to add variety to our scene that is now turning out to be a kind of ‘repeating groove,’ where we see, and hear, almost the same thing…over and over again!

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